According to data from June 19, 2024, the Bitcoin exchange reserve, which refers to the total amount of Bitcoin available on exchanges, has reached its lowest point in three years. Currently, there are 2,825,703 Bitcoin remaining on exchanges, compared to around 3,039,000 in January 2024.
A low exchange reserve, also known as exchange balance, suggests a decrease in selling pressure and the potential for supply shocks due to the limited availability of Bitcoin for purchase.
One factor contributing to this decrease in exchange reserves is the approval of Bitcoin ETFs in the United States in January 2024. Asset managers like BlackRock have been accumulating Bitcoin, adding to the pressure on its supply. As of June 6, BlackRock’s iShares Bitcoin Trust (IBIT) held approximately 274,000 Bitcoin. It’s worth noting that BlackRock’s ETF is just one of the 11 Bitcoin ETFs currently being traded in the United States.
In May 2024, there was a significant inflow of $2 billion into digital asset funds, driven primarily by investments in Bitcoin funds and products. According to the Coinshares Weekly Fund Flows report from June 17, Bitcoin investment vehicles globally hold nearly $73 billion worth of Bitcoin.
However, the same report also revealed that Bitcoin investment vehicles experienced weekly outflows of $621 million during the week of June 15, 2024. This is the largest and most significant outflow since the week of March 22, 2024. Coinshares attributed this to “more hawkish-than-expected” comments from the Federal Reserve, which led to capital flight from fixed-supply assets like Bitcoin.
Despite the growing interest from institutional investors, industry experts, including Franklin Templeton CEO Jenny Johnson, believe that institutional adoption of Bitcoin is still in its early stages. Johnson stated in an interview with CNBC that the current wave of early adopters is just the beginning, and the next wave will involve much larger institutions.
If Johnson’s prediction proves to be accurate, there will be continued inflow of institutional capital into Bitcoin, further increasing the pressure on the limited supply available on exchanges in the coming months.
Another factor contributing to the limited supply of Bitcoin is the April 2024 halving event, which reduced the block mining reward. Prior to the halving, miners received 6.25 Bitcoin for each successfully mined block. After the halving, this reward decreased to 3.125 Bitcoin per block.
In conclusion, the Bitcoin exchange reserve has reached a three-year low, indicating a decrease in selling pressure and potential supply shocks. Factors such as the approval of Bitcoin ETFs and the April 2024 halving event have contributed to the limited supply of Bitcoin available on exchanges. Despite increased institutional interest, experts believe that institutional adoption is still in its early stages, and the influx of institutional capital may further strain the limited exchange supply in the future.