Bitcoin Balance on Exchanges Reducing

[Shasha80]

Nowadays investors are getting smarter and have learned from the mistakes that happened before. With many exchanges scams
and hacks, of course, investors are looking for a safe place to store Bitcoin. Therefore, if you look at the chart Bitcoin balance on
exchanges must have decreased. Since investors currently only store Bitcoin on exchanges for trading purposes only, Most of the
Bitcoin they own will be stored in they personal wallet.

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[jaysabi]

Not to mention that exchanges have been known to socialise losses whenever there's a bad crash or liquidity wipe -- thereby literally reducing the account balance you have on Bitcoin. Can't recall the exact names but we've had some big names in the space in past few years do this.

That really only applies to active positions held on leveraged derivative markets, like futures or perpetual swaps. It can happen because the market depth can be too thin to absorb all the highly leveraged positions.

I guess it could technically happen on spot exchanges that allow leverage, like Bitfinex or Coinbase Pro, but the leverage offered is so low that it's extremely unlikely and historically has never happened. It's impossible on regular spot exchanges that don't offer leverage.

Hasn't this also pretty regularly happened in cases where exchanges have been hacked or otherwise lost coins? Not due to leverage, but just everyday run of the mill bad cybersecurity or poor management. The risks compound on each other- volatility, leverage, and having a third-party custody your coins. All could lead to loss of value for investors, and amplify losses when caused by any individually. 

[Dorodha]

I think it is possible to prevent erosion if the market is analyzed well before investing the risk will be much less here. Each investor monitors the exchange sites before the exchange and saves the currency in the wallet to minimize losses. Although there is always a balance after including all types of transactions as the overall exchange balance imbalances are possible in the individual components of the exchange balance such as current account, capital account or a combination of the two an imbalance in the sum of capital accounts can lead to an increase in wealth in a surplus country, while deficit countries become more indebted.

[Traderbtcc]

may i know the reason why holding or transferring bitcoins to personal wallet is a good reason? does it have any good effect to the current price of the bitcoin?

Not sure transferring to their wallet is a good thing cus with less volume there won't be much price movement, but I think the only good reason for people to transfer their bitcoins back to their wallet will be to avoid losing it to unexpected exchange hack, and nothing more.

i think if many people would hold their coins there would be a low trading volume in the market and this will result on slow change on the market and maybe slow progression of the bitcoin's price.

Agreed, because with less volume there's no way the price of bitcoin can surge ahead, since the value is determined by the market and the traders, so holding bitcoins back will definitely hinder it from growing.

[notblox1]

Update from January 2021 and balance of Bitcoins on exchanges is still going down and reducing!
This is very good news because around 80% of Bitcoins are illiquid and can't be purchased on exchanges, creating less sell pressure.
It should also be mentioned that liquidity is getting lower as bitcoin is becoming scarcer.

[magneto]

That's a great observation. Probably has something to do with the current bull run too.

Generally, a reduction in the coins on exchanges implies that people are getting out of BTC for speculative motives while moving their holdings to a long term portfolio. That reduces market supply and essentially creates shortage, increasing price in the short run.

Economics 101, essentially. But over the long run price action will still be determined by fundamentals, which is also strengthening right now.

Besides, as you said, people should move away from custodial wallets period, and that includes exchange balances. Use the bitcoin network as it's designed to, dammit.

[fillippone]

Update from January 2021 and balance of Bitcoins on exchanges is still going down and reducing!
This is very good news because around 80% of Bitcoins are illiquid and can't be purchased on exchanges, creating less sell pressure.
It should also be mentioned that liquidity is getting lower as bitcoin is becoming scarcer.

Increasing demand, via institutionals or even retail, and decreasing scarcity, from the reduced balance on changes, and reduced miners supply have surely contributed to driving the price up.
I just published something here:

This last rally Leg has been also bought by retail?

[bekti3]

Bitcoin on exchanges from October 2019 - October 2020

https://glassnode.com/

Let me ask you, if it is true that the decline in bitcoin on the exchange from October 2019 - October 2020. then what about November to January, while the trading volume continues to increase day by day? So, who trades large amounts of bitcoin, if deductions are made?

[error08]

Bitcoin on exchanges from October 2019 - October 2020

https://glassnode.com/

Let me ask you, if it is true that the decline in bitcoin on the exchange from October 2019 - October 2020. then what about November to January, while the trading volume continues to increase day by day? So, who trades large amounts of bitcoin, if deductions are made?

Whenever bitcoin balance on exchanges increasing, it could mean people deposit bitcoin to sell, and a Reducing the number of bitcoins on exchanges simply means that people withdraw their bitcoins for custody to private wallet or cold-storage, which results in less bitcoin to be traded while demand continues to grow to cause the bitcoin price to skyrocket. We know that institutional investors buying bitcoin by over the counter transactions. They are the ones who suck all that bitcoin into their wallet, it is a good thing since less bitcoin to sell on exchanges means less probability to dump it.