In recent times, the balances of Bitcoin and Ethereum on centralized exchanges have dropped to levels not seen since 2020 according to Glassnode data. The user balances of Bitcoin (BTC) and Ether (ETH) have reached a four-year low as investors opt to hold onto their assets in anticipation of higher prices in a bullish market. BTC balances fell below 2.3 million coins, equivalent to around $160 billion, while ETH balances decreased below 16 million, amounting to less than $59 billion.
The downtrend in the amount of BTC and ETH on exchanges has been observed since before July 2020, as per Glassnode data. Users have continued to withdraw their assets from these platforms following the pandemic, through the previous 2021 peak, during the 2022 Terra-FTX contagion, and even after the approval of spot BTC ETFs. This sustained pattern suggests that crypto users have taken on a bullish long-term outlook, demonstrating confidence in the future growth of these assets irrespective of market cycles. Additionally, the post-COVID-19 inflation and economic uncertainties have spurred investors to allocate capital into technologically sound vehicles. Bitcoin’s fixed supply and secure design have solidified its position as an inflation hedge, leading countries like El Salvador to embrace it as legal tender.
The bullish sentiment is further reinforced by the increasing institutional demand for Bitcoin. Wall Street giants like BlackRock and Fidelity have driven this demand by pushing for spot BTC ETFs. Moreover, entities like MicroStrategy, led by BTC advocate Michael Saylor, have invested billions in Bitcoin. Ethereum, being the second-largest cryptocurrency and a prominent altcoin, also has its own bullish thesis. It serves as a prominent player in the decentralized finance (defi) ecosystem, valued at almost $70 billion as per DefiLlama. The launch of the Beacon chain in 2020 initiated the transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism, allowing for Ether staking. Over 27% of Ethereum’s supply is currently staked, with users locking up over $119 billion worth of ETH in staking providers like Coinbase, Lido, and EigenLayer.
The optimism surrounding approval of spot ETH ETFs, growth in defi, and the surge in staking has contributed to a positive outlook for Ethereum. This has encouraged users to adopt a “hodl” strategy, indicating their commitment to holding onto their assets for the long term. The long-term future appears promising for both Bitcoin and Ethereum, with users displaying confidence in the potential growth of these assets despite market fluctuations. The trend of withdrawing assets from exchanges and holding onto them is indicative of the belief in the value and potential of Bitcoin and Ethereum in the evolving landscape of digital assets. As the crypto space continues to evolve and gain mainstream acceptance, the long-term prospects of Bitcoin and Ethereum seem bright, with both assets poised for potential growth in the future.
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