Number of Bitcoins on Crypto Exchanges Hits 18-Month Low

The total number of bitcoins held in cryptocurrency exchanges wallets dropped to an 18-month low just above 2.3 million on Monday, according to data estimates from Glassnode.

The decline marks an 11% year-to-date reduction in the number of bitcoins held by exchanges.

Over the same period, the amount of ether in exchange wallets increased by more than 7%. Some market participants see this as a sign that more bitcoin investors are increasingly taking direct possession of their cryptocurrency.

This type of investor partially contributes to the decline in exchange bitcoin balances by continuing to "Accumulate for the long term and self-custody their bitcoins," said Pierre Rochard, bitcoin strategist at Kraken, the largest U.S.-based cryptocurrency exchange by liquidity according to Cryptowatch.

It's important to note that on-chain data analysis of exchange balances is only an estimate given that some exchange addresses may be overlooked by or unknown to data aggregators.

"On-chain data is not perfect and new exchange wallets may be missed," added Rochard.

Others see bitcoins leaving exchanges for a reason completely unrelated to strong-willed, die-hard investors, however: the rise of prime brokers.

Felman added that currently "There are few alternatives to holding bitcoins on an exchange if you want to trade, but new offerings in the prime brokerage space will lead to greater outflows from exchange-specific wallets."

Tagomi, a digital asset prime brokerage, was also recently acquired by Coinbase in the San Francisco-based exchange's bid to expand its institutional trading service.

Regardless of the reason, a "Consistent decline in the supply of bitcoin on exchanges implies a strong level of confidence from the holder base," said Yan Liberman, former associate at Deutsche Bank and co-founder of digital asset research firm Delphi Digital.