Growth of Bitcoin ETFs and other instruments does not support the supply shock narrative
The data shows that although the supply of Bitcoin on the exchanges has trended downward, the growth of other investment vehicles such as ETFs and WBTC has offset this decline.
Bitcoin’s exchange reserves are shrinking, but ETF and other instruments are growing
According to the latest report from Arcane research, BTC foreign exchange reserves have seen a significant decline this year, but the growth of new investment instruments like ETFs has made up for it.
The “exchange reserve” is an indicator that measures the total amount of Bitcoin currently stored in the wallets of all exchanges.
Traditionally, this offer on the exchanges was considered the available trade offer of the coin. So, when the value of the indicator increases, it is seen as a bearish sign for the price of the coin. On the other hand, a decline can imply an uptrend.
The trend in the foreign exchange reserve has been steadily declining for six months now. Due to this “shortage of supply” many traders believe in a bullish outcome for Bitcoin in the long term.
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However, the report seems to suggest a different story. Here is some data that shows the percentage of the BTC supply in circulation in different segments:
Looks like most sectors have seen growth in the past year | Source: The Arcane Research Weekly Update - Week 50
As you can see in the graph above, while the supply of exchanges has declined, growth in other segments seems to more than offset this decline.
Related reading | Bitcoin mining is still alive and well in China despite crackdown
Exchange-traded investment vehicles now hold 0.69% more supply than last year. This shows that there is a growing demand for trading Bitcoin through familiar means (like ETFs). This trend may also indicate increasing adoption by institutional investors.
With an increase of 0.98% this year, BTC on the Ethereum network now accounts for 1.73% of the total circulating supply.
The report notes that these two sectors are important factors for Bitcoin price discovery, and therefore the growth here may not support the popular idea that a supply shock is brewing in crypto due to falling prices. foreign exchange reserves.
By the way, corporate treasury bills now hold 0.91% of the BTC supply in circulation. Microstrategy has been the main driver of this growth.
As of this writing, the price of Bitcoin is floating around $ 48.8,000, up 1.5% over the past seven days. Over the past month, the crypto has lost 16% in value.
Below is a chart that shows the crypto price trend over the past five days.
BTC's price seems to have surged up in the past couple of days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, Arcane Research