Amid the tussle between the bulls and bears in the crypto market over the past week, the circulating supply of both Bitcoin (BTC) and Ethereum (ETH) has reached record lows, triggering speculation about the potential impact on the cryptocurrency market.

Data provided by Santiment reveals a significant decrease in the amount of BTC and ETH held on exchanges, suggesting a shift in investor behavior.

According to Santiment’s data, the circulating supply of BTC on exchanges currently stands at a mere 5.7%, marking its lowest level since December 2017 when the cryptocurrency surged to an all-time high of $20,000.

Similarly, the supply of ETH on exchanges has dropped to 10.1%, the lowest since its inception in 2015. This trend indicates that crypto investors are actively buying and withdrawing their coins from exchanges, opting for alternative storage methods.

Santiment tweeted earlier today:

Bitcoin & Ethereum both continue to quietly see more and more of their existing supplies move into self custody. Though not a perfect indicator, declining coins on exchanges generally hint at future bull runs, given enough time playing out.

Notably, one key reason behind the declining supply of BTC and ETH on exchanges, particularly in the case of Ethereum, is the increasing popularity of staking. Ethereum 2.0’s transition to a proof-of-stake (PoS) consensus mechanism has provided ETH holders with the opportunity to stake their coins and participate in securing the network while earning rewards.

Stakers lock up their ETH in specialized wallets, ensuring its active involvement in the network’s operations rather than leaving it idle on exchanges. This shift towards staking is motivated by the desire to earn passive income and contribute to the long-term growth and security of the Ethereum ecosystem.

On the other hand, the Bitcoin decrease on exchanges is not so clear, however, the possible reason can be attributed to investors looking to keep their BTC holdings for a long time. This could be due to the feared upcoming global recession which has made many turn to the idea of saving funds for the supposed “rainy days.”

The dwindling supply of Bitcoin and Ethereum on exchanges could have significant implications for the broader cryptocurrency market mostly positively. Firstly, it suggests a decreasing selling pressure as fewer coins are readily available for trading. This “hints at future bull runs,” according to Santiment.

With a limited supply on exchanges, potential buyers might face greater difficulty acquiring these digital assets, leading to increased demand and potentially driving up the prices of both Bitcoin and Ethereum.

Additionally, the reduced presence of BTC and ETH on exchanges may indicate a growing confidence among long-term holders. Investors are likely becoming more inclined to hold their coins in secure wallets or participate in staking, signaling a belief in the future potential and value appreciation of these cryptocurrencies.

This shift in behavior reflects a maturing market where participants are increasingly focused on the underlying technology and long-term prospects rather than short-term trading.

Regardless, both BTC and ETH haven’t made any significant movement in the past week. BTC’s price has experienced little upward trend up by 0.3%. BTC has surged from a low of $26,819 seen last Saturday to trading as high as above $27,000 on Thursday.

In contrast, ETH’s price has experienced a slight upward trend up by 0.6% in the past week. ETH has surged from a low of $1,795 last Saturday to trading above $1,800, at the time of writing.

-Featured image from Shutterstock, Chart from TradingView

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