Bitcoin exchange reserve metric hits 3-year low
Low exchange balances indicate low selling pressure and could trigger a supply shock as institutional investors continue to accumulate Bitcoin.
The Bitcoin exchange reserve, the total amount of Bitcoin available on exchanges, has dropped to a 3-year low, according to data from June 19, 2024.
Analytics from CryptoQuant revealed that there are currently 2,825,703 Bitcoin left on exchanges. During January 2024, the Bitcoin exchange balance hovered at around 3,039,000.
Low exchange reserves, sometimes called exchange balance, indicate low selling pressure and potential supply shocks due to the relatively low supply available for purchase.
Pressure from Bitcoin ETFs
Following the approval of Bitcoin ETFs in the United States in January 2024, accumulation from asset managers like BlackRock placed added pressure on Bitcoin’s supply. As of June 6, BlackRock’s iShares Bitcoin Trust (IBIT) held roughly 274,000 Bitcoin. BlackRock’s ETF is merely 1 of the 11 Bitcoin ETFs currently trading in the United States.
During May 2024, monthly inflows into digital asset funds reached $2 billion, primarily driven by inflows into Bitcoin investment funds and products. According to the June 17 Coinshares Weekly Fund Flows report, Bitcoin investment vehicles hold nearly $73 billion in Bitcoin globally.
However, that same report also revealed Bitcoin investment vehicles recorded $621 million in weekly outflows for the week of June 15, 2024. This marked the largest and most significant outflows since the week of March 22, 2024.
Coinshares theorized that “more hawkish-than-expected” comments from the Federal Reserve, implying that the Fed would keep interest rates high, led to a flight of capital from fixed-supply assets like Bitcoin.
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Despite the increased institutional interest, industry experts, like Franklin Templeton CEO Jenny Johnson, believe institutional adoption is not in full swing. Speaking to CNBC, Johnson told her interviewer: “This is really the first wave of the early adopters, and I think the next wave is the much bigger institutions.”
If Johnson’s prediction turns out to be true, institutional capital will continue to flow into Bitcoin, placing additional pressure on the low exchange supply in the coming months.
The April 2024 halving
Additionally, Bitcoin’s supply is further constrained by the decrease of the block mining reward, following the April 2024 halving event.
Before the most recent halving, miners collected 6.25 Bitcoin for each block they successfully mined, following the halving miners now collect 3.125 Bitcoin for successfully mining a block.
