Bitcoin (BTC) exchange reserves are continuously plummeting as analysts pinpoint the trend to a shortage of sellers. Since the March crash, the reserves on exchanges rapidly fell from 2,950,000 BTC to 2,700,000 BTC.

Within merely seven months, a 250,000 BTC fall in exchange reserves signifies a $2.85 billion decline. Behind the steep trend could be two major factors: a decline in sellers and lower trust toward exchanges.

Bitcoin reserves on exchanges

Bitcoin reserves on exchanges. Source: Glassnode

Is the number of Bitcoin sellers dropping amidst an accumulation phase?

Analysts mainly attribute the sustained drop in Bitcoin exchange reserves to an overall shortage of sellers in the market.

As retail sellers refrain from selling BTC at current prices, institutions are also acquiring more BTC. The simultaneous drop in selling pressure and an increase in buyer demand is an optimistic trend for Bitcoin.

A pseudonymous trader known as “Oddgems” said the data shows Bitcoin is likely moving from exchanges to non-custodial wallets. If so, it indicates that investors are moving their funds to hold for a longer period. He said:

“More and more #Bitcoin getting out from exchanges and most probably being transferred to non-custodial wallets. This suggests slightly lower liquidity and lower selling pressure going forward.”

Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, echoed the stance. 

He emphasized that BTC outflows from exchanges are growing as cash reserves from institutions are flowing into Bitcoin. He noted:

“To be honest, more and more $BTC going from exchanges towards cold wallet storage. Big listed companies allocating cash reserves to $BTC. Is incredibly bullish.”

The confluence of stagnant retail outflows from Bitcoin and the consistent demand from institutions buoy the general sentiment around BTC. 

Dan Tapiero, the co-founder of 10T Holdings, similarly said that “shortages of Bitcoin” is possible due to the surging institutional interest.

Other supply metrics indicate higher HODLer activity

According to Glassnode, a large portion of the Bitcoin supply is stored in “accumulation addresses.” These addresses represent users who never moved BTC from their wallets, who are likely storing BTC for the long term.

When “HODLing” activity is high, which refers to holding onto BTC for prolonged periods, it typically indicates the start of an accumulation phase. Glassnode said:

“Bitcoin accumulation has been on a constant upwards trend for months. 2.6M $BTC (14% of supply) are currently held in accumulation addresses. Accumulation addresses are defined as addresses that have at least 2 incoming txs and have never spent BTC.”

The positive fundamental on-chain metrics supplement the favorable technical structure of Bitcoin. Despite various events that could have applied selling pressure on BTC, including the BitMEX probe and OKEx withdrawal suspension, BTC remains above $11,400.

The BitMEX and OKEx controversy also led exchange reserves to decline sharply, possibly spooking traders. Although BitMEX swiftly processed withdrawals and OKEx wallets show no outflows, the regulatory uncertainty was sufficient to cause exchange reserves to slip.

The BitMEX BTC supply

The BitMEX BTC supply. Source: CoinMetrics

In early October, technical analysts pinpointed the $11,100 to $11,300 range as a critical short-term resistance range. BTC has been relatively stable above the said range, which technically is a positive sign for renewed momentum.