Cryptocurrency exchanges currently hold 2.35 million bitcoins, which is about 12% of Bitcoin's total supply. This amount marks the lowest level of exchange-held Bitcoin in over six years, down from 2.72 million in January 2024 and 3.33 million in November 2022. The dramatic decline began in February 2024 as more investors moved their coins to self-custody solutions. These shifting patterns suggest significant changes in how people are managing their Bitcoin investments.
As Bitcoin investors increasingly move their holdings off exchanges, the amount of BTC held on trading platforms has dropped to its lowest level in over six years. Current data shows that exchanges now hold just 2.35 million BTC, representing about 12% of Bitcoin's total supply. This marks a significant decline from January 2024, when exchanges held 2.72 million BTC. According to insights from market analysts, this level has not been observed since hedge funds buying dips became increasingly prevalent.
The downward trend in exchange reserves isn't new. Back in November 2022, exchanges held 3.33 million BTC, but this number dropped to 2.93 million by December of that year. The most dramatic decline began in February 2024, with investors pulling their Bitcoin off exchanges at an increasing rate. During the 2022 bear market alone, over 300,000 BTC left exchange wallets. This trend aligns with the fact that 60% of mined Bitcoin is held by entities that rarely sell. The movement toward self-custody reflects Bitcoin's core principle of decentralization, eliminating reliance on traditional financial intermediaries.
Looking at how Bitcoin is distributed across exchanges, the landscape has changed since 2020 when the four biggest players – Binance, Huobi, Coinbase, and Bitfinex – controlled 40% of all exchange-held Bitcoin. The next ten largest exchanges accounted for 36%, while hundreds of smaller exchanges shared the remaining 24%.
Coinbase has emerged as a favorite among investors who want to buy and hold Bitcoin, though trading intensity varies widely between platforms.
The movement of Bitcoin away from exchanges tells an interesting story about investor behavior. When people move their Bitcoin to personal wallets or cold storage, it usually means they're planning to hold onto it for the long term rather than trade it. This shift has reduced the amount of Bitcoin readily available for trading, with the illiquid supply now reaching 14.8 million BTC.
The declining exchange reserves could have significant implications for Bitcoin's market dynamics. With fewer coins available for immediate trading, there's less potential selling pressure on the market. Some analysts suggest this could lead to a "supply shock" – a situation where demand outpaces the available supply, potentially driving up prices.
The ratio of Bitcoin held on exchanges compared to the total supply has also seen a notable decrease, falling from 0.18 in early 2022 to 0.13 in late 2024. This continuing trend suggests that more investors are taking direct control of their Bitcoin rather than leaving it in the custody of exchanges, reflecting a growing preference for self-custody solutions in the cryptocurrency market.
Frequently Asked Questions
Which Cryptocurrency Exchange Has the Highest Security for Storing Bitcoin?
Gemini and Coinbase are widely recognized as having top-tier security measures.
Both exchanges use cold storage for most customer funds, implement multi-factor authentication, and maintain significant insurance coverage.
They're regulated in multiple jurisdictions and follow strict security protocols.
Kraken also stands out with its security features and has never been successfully hacked.
However, no exchange can guarantee 100% security against all threats.
Can Bitcoin Exchanges Freeze or Block User Withdrawals During Market Volatility?
Yes, cryptocurrency exchanges can and do freeze withdrawals during market volatility. They've done this for various reasons, including liquidity problems, security concerns, or technical issues.
In 2022, several major exchanges like Celsius and Babel Finance suspended user withdrawals during market turbulence. Each exchange has its own policies and withdrawal limits.
For example, Binance allows up to 100 BTC daily after verification, while Crypto.com caps withdrawals at 10 BTC per day.
What Happens to Exchange-Held Bitcoin During a Platform Bankruptcy?
When a crypto exchange goes bankrupt, customer-held Bitcoin typically becomes part of the bankruptcy estate.
Users can't withdraw their coins due to an automatic stay, and they're usually treated as unsecured creditors.
They'll have to file claims and wait in line behind other creditors.
Recovery amounts are often just pennies on the dollar, and the process can take years.
There's no government insurance protecting crypto assets like there is for regular bank accounts.
How Do Hardware Wallets Compare to Exchange Storage for Bitcoin?
Hardware wallets and exchange storage offer different trade-offs.
Hardware wallets keep bitcoin offline and give users complete control of their private keys, but they're more complex to use and can be lost or damaged.
Exchanges make buying and trading bitcoin easy, with user-friendly interfaces and instant transfers.
However, exchanges control users' private keys and face risks from hackers.
They've also experienced bankruptcies and account freezes in the past.
What Percentage of Exchange-Held Bitcoin Belongs to Institutional Investors?
Based on recent data, institutional investors hold about 20% of Bitcoin on major exchanges through spot ETFs. This represents around 193,000 BTC held by 1,179 different institutions.
BlackRock's IBIT is the biggest institutional holder with over 71,000 BTC, while Grayscale's GBTC maintains about 44,707 BTC from institutional investors.
The percentage of institutional Bitcoin holdings has grown considerably, jumping from 14% in 2023 to 31% in 2024.
