The cryptocurrency market is currently experiencing a historic liquidity crunch, especially as the Bitcoin BTC -1.15% halving event approaches. This phenomenon is characterized by a significant reduction in the number of Bitcoins and other cryptocurrencies held on centralized exchanges.
In the past 90 days, approximately 60,000 Bitcoins, valued at just over $2 billion, have been withdrawn from trading platforms. This has brought the total number of Bitcoins on centralized exchanges to a multi-year low, with only 36,000 Bitcoins surpassing the 2 million mark. This is a stark contrast to the 2.513 million Bitcoins that were held on trading platforms as of November 5, 2022.
Within less than a year, exchanges have seen a reduction of 477,000 BTC. Fast forward to July 31, 2023, these platforms held about 2.096 million Bitcoins. This means that a whopping $2 billion worth of Bitcoin, equivalent to 60,000 BTC, has been withdrawn from these platforms based on the current BTC exchange rate.
A similar trend is observed with Ethereum ETH -2.24% (ETH). Data from various sources, revealed that as of November 5, 2022, trading platforms held 23.14 million ETH. However, by October 30, 2023, this number had dropped to 14.57 million ETH. This indicates that within less than a year, 8.57 million ETH, valued at $15.64 billion, was withdrawn from exchanges.
The situation with stablecoins is no different. Exchanges that held assets worth $35 billion in stablecoins last November now possess only $17.34 billion. This suggests that over $17 billion of ERC20-based stablecoins have been redeemed or removed.
The continuous lack of liquidity has intensified market volatility. A recent report by Falconx, citing data from Coin Metrics, stated that the depth of the cryptocurrency market in 2023 has reached its lowest point. With the impending Bitcoin halving, these liquidity cycles might deepen even further.
Crypto analytics platform ViewBase has found that nearly a quarter of the circulating supply of Ether (ETH) tokens are held on cryptocurrency exchanges. Specifically, 26,768,260 ETH are on exchanges, which is roughly 23.6% of all circulating ETH tokens, valued at $10.3 billion. Notably, almost all of these tokens are kept on 10 centralized exchanges, with Coinbase alone having custody of 8.5 million ETH tokens, which is about 7.5% of the supply.
Analysts suggest that while Bitcoin holders are stashing their coins, Ethereum holders seem more inclined to sell. This is evident from the fact that when the number of coins on exchanges decreases, it indicates that new buyers are entering the market, purchasing coins, and moving them to cold storage.
