The Impact of FTX’s Bankruptcy on Bitcoin Exchange Reserves

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The Decreasing Number of Bitcoins Held on Exchanges

According to on-chain data from CryptoQuant, there is currently only 2.09 million BTC held on exchanges, which represents approximately 10% of all circulating BTC. This amounts to around 51.7 billion euros at the current bitcoin price.

An Unprecedented Situation

This low number of bitcoins held on exchanges has not been seen since the beginning of January 2018. It is important to note that 2018 was a year of a significant price drop for bitcoin and a prolonged bear market. Thus, this low number may not be a positive sign for the market.

Lack of Confidence in the Market

Markus Thielen, the head researcher at Matrixport, explains that this situation is also a symptom of a lack of confidence in the market. The downfall of FTX not only affected the customers of FTX but also had repercussions on numerous other companies. Companies like Silvergate and Genesis incurred losses or even went bankrupt.

The Potential Benefits of Shrinking Exchange Reserves

The reduced number of coins held on exchanges may have a silver lining. It indicates that people are currently not planning to sell their coins and instead prefer to hold them in wallets that are not affiliated with trading platforms. This demonstrates a high level of confidence in bitcoin among investors.

A Positive Indicator for Bitcoin

Glassnode also frequently mentions the shrinking exchange reserves as a positive factor for the bitcoin price in their reports. According to a recent research study conducted by Bitfinex, loyal HODLers only accumulate more bitcoins, which contributes to the decrease in exchange reserves.

All Exchanges Considered

CryptoQuant’s data mentions “all exchanges,” but it is important to note that they are referring to exchange wallets that they are aware of. Since there are numerous exchanges, some of which may have already gone bankrupt, the total number of bitcoins held on exchanges may be slightly higher than what CryptoQuant reports. However, the figure provided by CryptoQuant is likely accurate for the majority of exchanges.

Conclusion

The decline in the number of bitcoins held on exchanges is a result of the FTX bankruptcy and the subsequent loss of confidence in the market. While this may raise concerns about the overall sentiment, it also indicates that investors have faith in bitcoin as they choose to keep their coins in personal wallets. The shrinking exchange reserves can be seen as a positive indicator for the bitcoin price, as loyal HODLers continue to accumulate more coins. It will be interesting to see how this trend evolves and how it affects the cryptocurrency market as a whole.