Starting from July 11, 2024, a total of 99,308 Bitcoins, valued at $5.96 billion, have been withdrawn from centralized exchanges (CEXs), bringing the reserves on these platforms down to levels not seen since November 19, 2018. Currently, CEXs hold 2,679,880 Bitcoins, which are worth approximately $162.9 billion based on Bitcoin prices as of August 14.
On the other hand, Ethereum’s reserves, or “ETH,” have also dropped to their lowest levels in years. CEXs currently hold 16.8 million Ethereum, a significant decrease of 18.64 million from the all-time high of 35.44 million Ethereum on June 4, 2020.

The Importance of Bitcoin Reserves

The amount of Bitcoin held on exchanges is a barometer of market sentiment and liquidity. When reserves increase, it typically indicates that investors are looking to sell or trade in response to current market conditions. Conversely, a significant drop in reserves suggests that participants are willing to hold onto their assets, signaling a long-term bullish sentiment.
The surge in Bitcoin withdrawals from exchanges over the past month indicates that investors are moving their Bitcoins off exchanges for “hodling.” The logic behind this behavior is a positive outlook on price, with investors expecting Bitcoin prices to rise in the future. Most believe in the principle of “Not your keys, not your coins,” so they often transfer their cryptocurrencies to cold wallets for long-term safekeeping when their confidence in the market is strong.

Impact of Declining Reserves

When a large amount of Bitcoin leaves exchanges, it can lead to a tightening supply, which may significantly impact market dynamics.

• Liquidity Changes: A reduction in the available Bitcoin supply for trading, if demand remains constant or increases, could lead to price appreciation. This is a critical phase in the market that could result in sharp price movements.
• Arbitrage Opportunities: A lack of liquidity may also create arbitrage opportunities, where traders exploit price differences between exchanges. While this is a key mechanism for balancing price discrepancies, it can also lead to increased volatility during periods of low liquidity.

Whales Are Accumulating

Data shows that since the beginning of 2024, over 1.9 million BTC have been moved into super wallets (including spot ETFs and custody wallets, excluding exchanges). The number of BTC held by whales has surged, marking an unprecedented level of activity among Bitcoin whales. This trend emerged following recent market crashes, leading some analysts to believe that the market may have already hit the cycle’s lowest point before the next bull run, as confidence in Bitcoin’s long-term potential grows.

Conclusion

Investing is like savoring a meal—the more delicious it is, the more you want to keep it to yourself, fearing it might be taken if handed over to someone else. The continued decline in Bitcoin and Ethereum reserves on centralized exchanges reflects a growing preference for non-custodial solutions, a positive signal for both asset security and scarcity, which is further validated by whale behavior.
As more users prioritize self-custody, the liquidity of crypto assets on exchanges decreases, enhancing their scarcity and potentially increasing their value over time. This trend benefits long-term holders and reinforces the principles of “Not your keys, not your coins” and Decentralized Finance (DeFi).