Bitcoin stock of exchanges reached the lowest level since 2018; Bullish sign?

While Bitcoin has been struggling to break through the $22,000 resistance for the past few days, new data shows a decrease in the cryptocurrency’s inventory on exchanges. Some experts also consider this issue as a background for the rarity of Bitcoin in exchanges and price rise to higher levels.

To Report CryptoSlate, data from analytics platform Glassnode shows that the number of bitcoins held in centralized exchanges has reached its lowest level since 2018. It seems that users are withdrawing their bitcoins due to the fear of widespread suspension of asset withdrawals on the Celsius and Babel Finance platforms. The chart below shows the sharp drop in the number of bitcoins on exchanges on June 13, when Celsius announced it had stopped withdrawals.

What is the reason for the withdrawal of Bitcoin from exchanges?

The volume of Bitcoin on exchanges reached 2.4 million units in 2018 and had never fallen below this level until June of this year. In May 2020, the number of bitcoins in exchanges reached a peak of 3.1 million units, and since then this index has been in a downward trend.

Historically, investors have typically viewed cryptocurrency exits from exchanges as a bullish indicator. As the reserves of digital currencies in exchanges decrease, liquidity is low and their exchange becomes more difficult. Many believe that when exchange outflows increase, it is because investors are moving cryptocurrencies to their cold wallets to hold them for the long term.

Coinbureau (Coinbureau), one of the famous YouTubers active in the field of digital currencies, has said regarding the concerns of users regarding the conditions of centralized exchanges:

It is now more important than ever for everyone to personally take care of their assets. Repeat this sentence with me: If I don’t have the private key of my wallet, there is no digital currency (referring to the famous saying “Not your keys, not your coins”). We cannot be sure that the centralized lending platforms will be able to pay their debts. Participation in their funds depends only on the level of trust of users, but cryptocurrencies are inherently “trustless”. [برای نگهداری از دارایی‌هایتان] You don’t need anyone’s guarantee; Rather, only you should keep your digital currencies.

This topic was also discussed in detail in a Twitter space between Crypto Slate, the EAM Crypto account, and the Defi Yield App. The custodial nature of centralized exchanges was challenged by Enrique, a member of the EAM Crypto team. In this audio conference, he claimed that the collapse of Terra may still be seen on other platforms.

Brad Mills, host of the “MIM” podcast, recently reminded his followers of the Mt. Gox exchange disaster.

Mills said:

The Matt Gox exchange debacle taught me that “your assets are not yours until you keep them yourself” and “nothing should be trusted without verification”. I’m still in the market and you might be new. This downtrend is only resetting the market.

Investors on the Celsius platform are still unable to access their funds two weeks after the suspension of withdrawals began. Keeping Bitcoin in personal wallets gives investors complete control over their assets, while keeping cryptocurrencies in an exchange account is like putting your assets in a bank that isn’t even backed by the government.

With the number of bitcoins in the exchange accounts reaching below 2.4 million units, while more than 30 million investors use the Binance exchange alone, the rarity of this asset is increasing. If demand for Bitcoin continues to grow and exchange inventories continue to dwindle, this could create a strong backdrop for the price of the digital currency to jump higher.