According to data from June 19, 2024, the Bitcoin exchange reserve, which refers to the total amount of Bitcoin available on exchanges, has reached its lowest point in three years. CryptoQuant’s analytics reveal that there are currently 2,825,703 Bitcoin remaining on exchanges, compared to around 3,039,000 in January 2024.
A low exchange reserve, also known as exchange balance, signifies a decrease in selling pressure and the potential for supply shocks due to the limited supply available for purchase.
One contributing factor to this decrease in exchange reserves is the approval of Bitcoin ETFs in the United States earlier in January 2024. Asset managers like BlackRock have been accumulating Bitcoin, putting additional pressure on its supply. As of June 6, BlackRock’s iShares Bitcoin Trust (IBIT) held approximately 274,000 Bitcoin. BlackRock’s ETF is just one of the 11 Bitcoin ETFs currently being traded in the United States.
In May 2024, there was a significant influx of $2 billion into digital asset funds, driven primarily by investments in Bitcoin funds and products. According to the Coinshares Weekly Fund Flows report from June 17, Bitcoin investment vehicles globally hold nearly $73 billion worth of Bitcoin.
However, the same report also revealed that there were weekly outflows of $621 million for the week of June 15, 2024. This marked the largest and most significant outflows since the week of March 22, 2024. Coinshares suggests that this outflow could be attributed to “more hawkish-than-expected” comments from the Federal Reserve, indicating that interest rates would remain high. This led to a flight of capital from fixed-supply assets like Bitcoin.
Despite the growing institutional interest in Bitcoin, industry experts, including Franklin Templeton CEO Jenny Johnson, believe that institutional adoption is still in its early stages. Johnson stated in an interview with CNBC, “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 proves to be accurate, institutional capital will continue to flow into Bitcoin, adding further pressure to the already limited supply on exchanges in the coming months.
Another factor contributing to the constrained supply of Bitcoin is the decrease in block mining rewards following the halving event in April 2024. Prior to the halving, miners received 6.25 Bitcoin for each successfully mined block. Now, they only receive 3.125 Bitcoin per block.
In conclusion, the Bitcoin exchange reserve has reached a three-year low, indicating low selling pressure and potential supply shocks. Factors such as the approval of Bitcoin ETFs and the decrease in block mining rewards have contributed to this situation. Despite increased institutional interest, experts believe that institutional adoption is still in its early stages, and if this holds true, it will further strain the already limited supply of Bitcoin.