Bitcoin Supply on Exchanges Drops to Three-Year Low Amid Sustained Outflows

The latest chain data reveals a significant shift in how bitcoin is being distributed across the market. Bitcoin supply on exchanges continues its decline, reaching another three-year low as investors increasingly move their holdings off trading platforms. With BTC currently trading around $88.69K, the structural trend in exchange reserves tells a more compelling story than daily price movements alone.

When Exchange Reserves Fall, Who Holds the Bitcoin?

The proportion of bitcoin on exchanges relative to circulating supply has contracted sharply, a trend that began in March 2020 and shows no signs of reversing. The numbers tell the story: since June’s market peak earlier this year, exchange holdings have dropped approximately 9%, representing over 250,000 BTC migrating away from trading platforms. This is particularly noteworthy because it contradicts typical market cycle behavior.

Historically, when markets approach their peaks, we observe increased bitcoin flowing into exchanges as holders attempt to capitalize by selling at higher prices. Yet this pattern is notably absent. If we were truly at a macro market top, exchange balances would typically show substantial inflows as distribution occurred. Instead, the opposite is happening—bitcoin is systematically leaving exchanges.

Reading the Signals: Flow Patterns and Market Cycle Indicators

To understand daily movements in bitcoin supply on exchanges, analysts track net flow activity—the daily influx or outflow of bitcoin across exchange wallets. Glassnode, a leading on-chain data provider, classifies exchange wallets using advanced data science and clustering techniques to measure these flows. However, interpreting this data requires caution; exchange categorizations shift as platforms modify their operational practices.

A practical example: when 10,000 BTC appears to flow out of an exchange on a given day, confirmation typically takes several days to distinguish genuine withdrawals from misclassified internal wallet transfers. To filter out daily noise and reveal meaningful patterns, a 14-day moving average of net flows provides a clearer picture. What this reveals is striking—compared to previous all-time high rallies and prior market peaks, current inflow activity remains remarkably subdued. During those historical peaks, exchange inflows surged as selling pressure intensified. Today, that signal is simply not present.

The Supply Shock Effect: How Off-Exchange Holdings Shape Price

As bitcoin supply on exchanges contracts, the inverse metric rises: non-exchange balances are expanding. Beginning a couple of months after March 2020’s market inflection point, a powerful and sustained correlation emerged between growing non-exchange holdings and rising bitcoin prices. This relationship represents something historically rare—a five-year pattern that stands apart from previous market cycles.

The mechanism is economically straightforward: when bitcoin leaves exchanges and becomes off-market, available supply for sale diminishes. Simultaneously, new buying demand continues entering the market. This fundamental supply-demand dynamic creates upward price pressure. Bitcoin’s history shows no precedent for coins leaving exchanges at the current rate, suggesting the structural forces at play may be unusually significant for price formation moving forward.

The sustained flow of bitcoin from exchanges into non-custodial wallets and long-term holdings reflects a market structure that differs substantially from prior cycles. Understanding bitcoin supply on exchanges and its inverse relationship with non-exchange balances provides crucial context for interpreting longer-term price trajectories beyond short-term volatility.