In brief

  • The amount of Bitcoin sitting in exchange wallets has fallen to its lowest value since November 2018.
  • Meanwhile, the number of BTC circulating as wrapped assets on other blockchains has multiplied more than ten-fold in three months.
  • Recent news surrounding the world's largest Bitcoin derivatives exchange led to one of the biggest BTC pullouts in history.

The amount of Bitcoin (BTC) sitting in cryptocurrency exchange wallets has now fallen to its lowest value since November 2018, having been on the downtrend since February.

As per data from Glassnode, the total number of Bitcoin sitting in exchange custodial wallets reached its all-time highest value at 2.97 million BTC on February 11, 2020, and has been on a stark downtrend ever since. As of writing, the number of Bitcoin sitting on exchanges has now dropped by more than 13% to reach 2.57 million—its lowest value in close to two years.

Total BTC balance on centralized exchanges. (Image: Glassnode)

Since cryptocurrency exchanges are notorious for being breached on a regular basis, it appears that Bitcoin holders are beginning to prioritize self-custody over liquidity, and are instead opting to manage their own private keys.

This could also signal an increase in long-term holders, as people increasingly look to withdraw their assets from cryptocurrency exchange coffers to sit on it for the long haul.

While cryptocurrency exchanges are seeing their BTC balances slowly drained, Bitcoin's use in decentralized finance (DeFi) has grown strongly this year. According to data from DeFi Pulse, the number of BTC locked up in the Bitcoin Lightning Network has been on a steady uptick for more than a year, and has climbed from ~819 to almost 1,200.

BTC tokenized on other blockchains. (Image: Dune Analytics)

Likewise, the number of BTC being tokenized on Ethereum has skyrocketed in recent months as more people than ever before look to push their BTC through the growing number of Ethereum DeFi apps. There is now a total of 92,583 BTC wrapped as ERC-20 tokens on Ethereum—a number that has increased tenfold since July.

The number of RenBTC, i.e. BTC tokenized on the Ren blockchain, has experienced a similarly dramatic increase in recent months, increasing from 1,161 renBTC three months ago, to over 23,200 today.

Though it is unclear what caused the gradual BTC drainage from cryptocurrency exchanges in general in the last few months, recent reports that BitMEX—the largest Bitcoin derivatives exchange—had been accused of criminal activity by the CFTC saw more than 22,300 BTC withdrawn from the exchange in under a day, marking one of the largest BTC 'exchange' runs in recent history.

And presumably taking the amount of Bitcoin on exchanges, to new lows.