Coinbase, a popular cryptocurrency exchange, has experienced a significant decrease in its Bitcoin holdings, reaching the lowest level in nine years. According to a report by CryptoQuant, large Bitcoin holders, known as whales, transferred 18,000 BTC, valued at almost $1 billion, off the exchange over the weekend. The transfer amounts ranged from $45 million to $171 million. As a result, Coinbase’s public order book now holds approximately 394,000 BTC, which is estimated to be worth $20.5 billion.
The movement of BTC holdings away from centralized exchanges by whales is seen as a positive sign, as it reduces the amount of Bitcoin available for sale. However, opinions on social media vary regarding the purpose of these transfers. Some believe that the funds are being moved to custodial wallets in anticipation of a price surge, particularly due to the upcoming Bitcoin halving, which is only two months away and is expected to create a supply shock. Others speculate that the transferred funds might be used for liquidity in over-the-counter trades.
There are also suggestions that the funds could be going to a different custodian, implying that these transfers are not individual withdrawals. It is noted that most of the Bitcoin held in these exchanges does not actually belong to them, so the actual number of withdrawals might be lower than reported.
During each Bitcoin halving cycle, the amount of new BTC entering the market is halved, resulting in a supply shortage as demand continues to grow. The next halving is scheduled to occur in April, at a block height of 740,000. After the halving, the block reward for miners will be reduced from 6.25 BTC to 3.125 BTC. This event is happening alongside a significant increase in institutional demand, with 11 spot Bitcoin exchange-traded funds (ETFs) already approved in the United States in January.
Currently, approximately 900 BTC is mined daily, while Bitcoin ETFs receive daily net inflows of around half a billion dollars, equivalent to about 9,650 BTC. Despite Grayscale, a cryptocurrency investment firm, experiencing daily outflows of nearly $100 million, the overall demand from institutional investors remains strong. After the halving in April, the daily production of BTC will be reduced to approximately 450 BTC, while institutional demand is expected to keep rising. This significant gap between supply and demand has historically led to a bullish trend in the Bitcoin price, often resulting in new all-time highs within a year of the halving.
At present, Bitcoin is trading at around $52,000, its highest level since December 2021, although it has experienced a 25% decrease from its previous all-time high of around $69,000.