Per Glassnode data, BTC on exchanges dropped below the 11% mark, a scenario last seen in March 2018.
This significant decline to approximately 2.3 million BTC reflects a shift in investor behavior and market structure, with implications for Bitcoin's liquidity and price dynamics
Why is a Hodling Trend Skyrocketing in the Bitcoin Ecosystem?
Coins leaving exchanges in droves is deemed bullish because they are held for future purposes other than speculation.
As a result, selling pressure decreases because cryptocurrencies are usually kept in exchanges for liquidation purposes.
Since this trend is playing out in the BTC network with exchange balances being at a 7-year low, more holders are moving their coins to digital wallets and cold storage, showing long-term confidence.
CryptoQuant data also shares similar insights that Bitcoin’s hodl level has hit a 2-year high, according to the Bitcoin exchange flows to network activity ratio.
This measure, also known as the Fund Flow Ratio, is a key on-chain metric that measures the proportion of Bitcoin moving through exchanges relative to the total transaction volume on the network.
It's calculated by dividing the total exchange inflows and outflows by the total amount of Bitcoin transferred across the entire network.
One primary factor contributing to exchange balance dropping is the migration of Bitcoin holdings from exchanges to institutional custodians, particularly following the approval of Bitcoin Spot exchange-traded funds (ETFs) in January 2024.
Major asset managers, including BlackRock and Fidelity, have accumulated substantial Bitcoin reserves for their ETF products, often utilizing custodians like Coinbase.
This movement has led to a reclassification of holdings, where assets previously counted as exchange balances are now under institutional custody.
Banking giant JP Morgan recently revealed that it could accept Bitcoin ETF shares for loans, in the process, unlocking new credit lines.
Delving Deeper into Bitcoin’s Supply Shock Scenario
A supply shock occurs when the availability of an asset diminishes while demand remains steady or increases, often leading to a price surge.
In Bitcoin's case, several converging factors have the potential of creating a notable supply shock:
1. Post-Halving Scarcity and ETFs
Bitcoin's protocol includes a halving event approximately every four years, reducing the reward miners receive for adding new blocks to the blockchain.
The most recent halving in April 2024 decreased the block reward from 6.25 BTC to 3.125 BTC, effectively halving the rate at which new bitcoins enter circulation.
This reduction tightens supply, especially as demand continues to grow.
The introduction of spot Bitcoin ETFs has provided institutional investors with a regulated avenue to gain exposure to Bitcoin.
2. Corporate Treasury Adoption
An increasing number of companies are incorporating Bitcoin into their corporate treasuries as a hedge against inflation and currency devaluation.
As of June 2025, 80 firms collectively own around 3.4% of the total Bitcoin supply.
Notable examples include MicroStrategy, which holds approximately 580,000 BTC, and GameStop, which recently invested $500 million into Bitcoin.
South Korean entertainment conglomerate K Wave Media recently revealed plans to roll out a $500 million Bitcoin treasury strategy with the aim of expanding its K-pop related business, including music distribution and concert management.
3. Macroeconomic Tailwinds
Global macroeconomic factors are also contributing to Bitcoin's bullish outlook.
The U.S. Federal Reserve's monetary policies have led to an expected 18% increase in the global M2 money supply in 2025, from $107 trillion to over $127 trillion.
This monetary expansion, coupled with a weakening U.S. dollar, enhances Bitcoin's appeal as a store of value.
Conclusion
The decline in exchange-held Bitcoin reduces the immediate supply available for trading, potentially leading to decreased selling pressure.
In economic terms, a lower supply amid steady or increasing demand can exert upward pressure on prices.
With BTC reserves on exchanges hitting a 7-year low, it remains to be seen whether a supply shock will jumpstart the apex cryptocurrency to the next level as Bitcoin traverses the $105,216 level.
