Bitcoin Exchange Supply Hits Multi-Year Lows, But Analysts Say the Bullish Signal Has Changed

Bitcoin’s declining exchange supply has long been viewed as one of the strongest bullish indicators in the crypto market, signaling that investors are moving coins into long-term storage rather than preparing to sell. However, industry experts now argue that the metric is no longer as reliable as it once was because of the rapid growth of institutional custody, spot Bitcoin ETFs, and decentralized finance (DeFi).

Blockchain analytics firm Santiment recently noted that Bitcoin and Ethereum balances on centralized exchanges have fallen to their lowest levels since 2017 and 2015, respectively. Bitcoin now has just 6.6% of its circulating supply on exchanges, while Ethereum stands at 4.3%. Historically, such sustained declines have often preceded extended bull markets by reducing the amount of cryptocurrency readily available for sale.

Despite this, Bitcoin has remained well below its all-time high even after months of historically low exchange balances. Analysts say the market structure has evolved significantly.

Eneko Knorr, CEO of stablecoin platform Stabolut, explained that coins leaving exchanges are no longer moving exclusively into cold storage. Instead, many are being transferred into DeFi protocols, wrapped into assets like WBTC, or placed in institutional custody through providers such as Coinbase Custody, Fidelity Digital Assets, and BitGo.

The rise of spot Bitcoin ETFs has also transformed the market. ETF issuers purchase Bitcoin to back newly created shares, shifting coins away from exchanges while maintaining active market exposure through regulated investment products. According to Coinglass, U.S. spot Bitcoin ETFs currently hold approximately $73 billion in net assets, representing more than 641,400 BTC, while spot Ether ETFs hold about $13.7 billion.

Although the traditional exchange supply metric has become less predictive, analysts agree that Bitcoin accumulation remains strong. More than 130 public companies now hold Bitcoin on their balance sheets, while Bitcoin Treasuries estimates public firms, private companies, governments, ETFs, exchanges, and DeFi protocols collectively control millions of BTC. Combined with nearly 7 million dormant Bitcoin, roughly 56.5% of the cryptocurrency’s circulating supply is currently sitting outside active trading, reinforcing the long-term HODL trend despite changing market dynamics.