Since the cryptocurrency winter of 2022, the situation has completely changed for centralized exchanges (CEXs). The market has generally recovered from that episode, but these platforms have never fully regained public trust. Large holders prefer to avoid these companies and only turn to them to liquidate or buy coins.
Failures in exchanges in 2022 caused large holders to abandon the idea of keeping their coins on these platforms. Since then, BTC reserves on these exchanges have begun a process of depletion that continues unwavering.
A recent article from CriptoTendencia analyzes the process of BTC withdrawals from CEXs so far this year (up to July 13). The article also points out that the entry of institutional investors into the market, with massive demand, has increased the pace of outflows. "Both spot Bitcoin ETFs and corporate treasury bonds absorbed billions of dollars in BTC," it noted.
Another interesting piece of information was highlighted in last week's Bitcoin whale activity report. The report noted that whales sent large amounts of BTC to exchanges, causing the price to drop.
However, despite the clear interruption of the downward trend in Bitcoin reserves on exchanges, especially on July 31, the downward trend continued throughout the week.
What does it mean when Bitcoin reserves on exchanges are decreasing?
The enormous whale flows to exchanges on Friday did not prevent the downward trend in BTC reserves on CEXs from continuing last week.
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What does the decrease in Bitcoin reserves on CEXs mean?
Now that the causes of the decline in BTC reserves on exchanges are clear, it is worth analyzing the consequences. It is worth saying from the outset that there are no big secrets at this moment, and everything boils down to the simple dynamics of trading.
As a scarce and highly sought-after asset, the natural price growth trend of Bitcoin is one of permanent appreciation. However, the depletion of BTC reserves on trading platforms exacerbates the scarcity problem. Basically, while demand continues to grow, supply also maintains a sharp downward trend.
This ensures extreme scarcity in the future, commonly known as supply shock. In such a situation, available coins are bought quickly, dramatically increasing the value of the asset.
Some experts even predict that, in the not-too-distant future, people will have to enter long waiting lists to buy fractions of Bitcoin.
In any case, the current reality speaks for itself: the Bitcoin available for purchase is rapidly running out. BTC enthusiasts recommend that investors buy while they can and accumulate for the long term. In times of scarcity, owning fractions of BTC can be equivalent to a great treasure.