Bitcoin deposits hit record low, as ETFs and long-term holding emerge as main players
Unleashed: Bitcoin's Hidden Transformation
As Bitcoin (BTC) sustains its grip above the $100,000 psychological price barrier, an intriguing revolution is brewing among investors. Most strikingly, the activity of deposit addresses is plummeting, suggesting a growing confidence in BTC as a potent store of value.
Depository Desert: Exchange Address Activity Sinks to Record Depths
A recent post by on-chain analyst Darkfost on CryptoQuant suggests a striking alteration in Bitcoin deposit patterns since the 2021 bull run. The following chart, shared by the analyst, underscores the trend. The number of addresses depositing BTC on exchanges surged between 2015 and 2021, peaking at an annual average of approximately 180,000. But post 2021, this trend has taken a nose dive, exhibiting no signs of recovery.
The 10-year average for the number of addresses depositing BTC to exchanges currently hovers around 90,000. Short-term metrics support this downfall. The 30-day moving average (MA) lingers around 48,000, while the daily figure has dropped to a mere 37,000. This seismic shift among investors can primarily be attributed to two primary factors.
Sources of the Shift
The Bitcoin ETF Tidal Wave
The introduction of BTC exchange-traded funds (ETFs) has diverted a substantial portion of demand away from spot exchanges. ETFs provide exposure to Bitcoin's price performance without the complexity or risk of self-custody, leveling up access for new investors.
Tamed Retail Flames
Relative to earlier market cycles, retail participation has been relatively subdued in the current market cycle, inevitably reducing the number of active deposit addresses.
Nonetheless, Darkfost observes, "More investors, and even companies, are adopting a long-term vision for BTC, choosing to hold it as savings or treasury reserves rather than actively trading."
Toward New Records?
As the number of addresses depositing BTC to exchanges continues to dwindle, several indicators point towards the potential for a new all-time high (ATH). Recent analysis by crypto analyst CryptoGoos suggests that short-term sellers may be waning, implying that selling pressure may ease soon.
Furthermore, the Bitcoin Rainbow Chart—a long-term valuation model—recently flashed a "buy" signal, despite the broader market demand remaining weak. Macroeconomic conditions might also turn favorable, with an expected increase in the global M2 money supply potentially boosting risk-on assets like Bitcoin. Some experts even predict BTC could reach as high as $150,000 as liquidity expands.
However, pending signs are not entirely optimistic. Miner-to-exchange transfers have recently spiked to historic highs, potentially signaling increased selling pressure from BTC miners. At press time, BTC is trading at $105,141, up 2.6% in the previous 24 hours.
In summary, the decrease in Bitcoin wallet addresses depositing to exchanges since 2021 is likely driven by factors such as technological advancements, regulatory changes, security concerns, and shifts in user behavior caused by market volatility and the rise of decentralized financial solutions.
Technology's influence in finance and investing is evident as the decline in Bitcoin deposits to exchanges might be attributed to the proliferation of Bitcoin ETFs, providing easier access for new investors. Additionally, the growing trend of long-term Bitcoin investment, driven by a shift in user behavior and increased confidence in BTC as a store of value, could potentially lead to new record highs in the future.
