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Here are the Two Reasons Why Bitcoin Investors are Fleeing Exchanges

Cole Petersen

Cole Petersen | May 03, 2020 | 19:00

Bitcoin BTC Bitcoin

Here are the Two Reasons Why Bitcoin Investors are Fleeing Exchanges

Cole Petersen

Cole Petersen | May 03, 2020 | 19:00


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  • Bitcoin’s recent rally has closely coincided with a trend of investors fleeing exchanges
  • It appears that the two primary factors behind this trend are degrading trust in centralized platforms coupled with more investors moving towards a long-term “hodling” strategy
  • Either way, this trend does bolster Bitcoin from a fundamental perspective

Bitcoin’s intense uptrend seen in the time following its mid-March meltdown has ushered in a significant influx of new capital to the market – a sign that retail traders largely thought that the crypto was undervalued at its recent lows.

This can be seen while looking towards the fact that margin traders have largely moved to the sidelines while spot traders take the reins.

Many of these spot buyers have also been moving their BTC away from centralized exchanges and into cold storage wallets, and it appears that there are two primary factors driving this trend.

Bitcoin Spot Traders Flee Crypto Exchanges as Rally Heats Up 

Bitcoin’s explosive rally seen throughout the past few weeks has reached a turning point as the crypto struggles to surmount its overhead resistance within the lower-$9,000 region.

It is important to keep in mind that this recent uptrend was driven primarily by spot buying pressure from retail traders, which makes this movement different than the margin-driven ones seen in previous months.

It appears that the bulk of these retail investors who drove this rally are taking a long-term investment strategy as well, as data from research platform Glassnode shows that exchange’s BTC balances have dived throughout the course of this rebound.

Bitcoin BTC

Image Courtesy of Glassnode

This means that this Bitcoin has been moved away from exchanges and towards cold storage wallets – a sign that the investors who drove this movement aren’t planning to sell their BTC anytime soon.

Here are the Two Primary Factors Likely Driving This Trend

According to a recent research report from Arcane, it appears that there are two primary factors driving the massive decline in exchanges’ BTC balances.

They explain that the first reason could be due to degrading trust in centralized exchange platforms, as many investors have blamed BTC’s mid-March meltdown on the BitMEX “hardware issues” that led investors to see an overwhelming cascade of liquidations.

“This could…be related to a lack of exchange trust, as investors are getting more nervous about exchanges credibility, possibility with the controversial around BitMEX when the price crashed on March 12th in mind,” they noted.

It could also be rooted in the bullish possibility that investors turning to long-term investment strategies.

“As the BTC price has rebound strongly since the drop, this may indicate that more hodlers are moving their coins off exchanges and hence unlikely to sell their funds,” Arcane Research bullishly notes

Featured image from Unplash.

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