The amount of bitcoin and ether traders hold in exchanges relative to total supply has dropped dramatically in the past few weeks, which analysts say cuts the chances of another big sell-off in the two cryptocurrencies.
The ratio of bitcoin held on exchanges versus total number of coins in circulation has fallen to 13% in July, its the lowest level in 6 months, according to data from crypto analytics group Santiment on Tuesday.
Similarly, the amount of ether held on exchanges as a percentage of total supply fell to just 18% in June, which is the lowest on record and the most recent figures from Santiment.
“The ratio of bitcoin’s supply on exchanges has encouragingly slid down to its lowest since early January. The six-month low is a promising sign, as it generally will indicate that there is a decreased risk of more major BTC selloffs,” Santiment said on Twitter.
This data calculates the level of reserves held on exchanges like Kraken, Binance, Coinbase as a percentage of all the bitcoin in circulation. A fall in the amount of cryptocurrency held on exchanges suggests more people are buying tokens and holding them in their own wallets, meaning there is less scope for a big sell-off.
These reserves were high in May, around the time when the sell-off in bitcoin began to gather pace. Exchange flows can help signal what direction bitcoin is likely to head in the short to medium term.
“With more outflows from exchanges, a positive as it means people are holding coins to private wallets and fueling less selling pressure, it seems that the bearishness might be -slowly- reverting to a more supportive narrative,” Justin d’Anethan, who is head of sales at crypto platform EQONEX, said.
Bitcoin was last up around 1.1% at $34,060 on the Coinbase exchange on Tuesday. It’s recovered about 18% since late June’s multi-month lows, but is still around 50% off the all-time high in April just above $65,000.
Ether was last trading almost 5% up on the day on the Kraken exchange around $2,306. It’s up by around 35% from three-month lows hit in June, but down 45% from May’s record highs.
Institutional investors have poured $39 million into bitcoin in the week to July 5th, according to weekly flows data from CoinShares, highlighting how the previous dip in price has encouraged big players back into the market. Ether saw inflows of $17.7 million in the latest week, partially reversing a run of outflows, according to the data.