Why Traders Keep Bitcoin Off Exchanges Now

The CryptoQuant chart tracking Bitcoin reserves on exchanges shows a consistent decline, which has become particularly steep since 2023.

Conventional wisdom interprets declining exchange reserves as a sign of accumulation, suggesting that holders are reluctant to sell their coins. Following this logic, reduced supply should lead to price appreciation.

But here's an interesting perspective: what if we’ve got the cause and effect backward? What if it’s the price increase that’s driving Bitcoin off exchanges, rather than the other way around?

Consider these numbers:

• On November 13, 2022, traders held 3,125,896 BTC on exchanges, worth $51 billion at the time.
• By January 9, 2025 (the latest data point available), exchange holdings had dropped to 2,554,661 BTC, but their value had skyrocketed to $237 billion.

Most people today measure their savings in dollars and other fiat currencies, not in Bitcoin. From this perspective, the value held on exchanges has increased nearly fivefold!

In early 2025, traders are entrusting exchanges with five times more value than in late 2022 - an astronomical increase! It would be unrealistic to expect this trust level to climb even higher, with traders keeping all their Bitcoin on exchanges.

The exodus from exchanges doesn’t necessarily indicate an unwillingness to sell. People might be ready to sell, but they’re likely uncomfortable keeping increasingly valuable holdings on exchanges, especially given Bitcoin’s dramatic price surge since mid-2023.

At rabbit.io, we rarely see anyone exchanging a whole Bitcoin anymore. However, we regularly handle transactions where users exchange Bitcoin in smaller portions, spreading their trades across multiple sessions - whether they’re buying or selling. There’s plenty of liquidity to go around, and Bitcoin supply remains robust.