Bitcoin supply on crypto exchanges hits 5-year low and that’s a good sign

The number of Bitcoins held on centralized exchanges has dropped to its lowest level in over five years. This trend reflects a clear shift in investor behavior as more holders choose to move their BTC into personal wallets and cold storage solutions.

On-chain data shows that investors are increasingly favoring long-term custody strategies, often interpreted as a sign of growing confidence in Bitcoin’s future, especially among more sophisticated market participants like institutions.

Growing institutional interest

Retail investors tend to leave their assets on exchanges for easier access and trading, but the recent decline in exchange balances suggests that a larger portion of the market is now playing the long game. This aligns with growing institutional interest, where secure custody is the standard, and capital is often allocated with multi-year horizons in mind.

Tariffs could be beneficial for Bitcoin

This development comes at a time of renewed market volatility. President Donald Trump reignited trade war concerns by imposing tariffs on key international partners. The announcement briefly sent traditional markets into a tailspin, highlighting how fragile investor sentiment remains. Although Trump later introduced a 90-day pause on the tariffs, which temporarily eased pressure on equity markets, the broader sense of instability has only strengthened Bitcoin’s appeal as a hedge against macroeconomic risk.

Supply crunch sets Bitcoin up for a breakout

As the BTC supply on exchanges continues to decline, market liquidity becomes more constrained. If demand rises due to political tensions, inflation concerns, or capital flight, fewer coins will be available to meet it. This kind of supply crunch has historically triggered sharp upward movements in Bitcoin’s price. In short, declining exchange reserves are more than just a bullish signal, as they set the stage for potentially explosive price action during periods of rising demand.

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.