Coinbase Reserves Hit Nine-Year Low

The amount of BTC held on Coinbase is rapidly falling. What happens when demand can no longer be met?

What happens when the well runs dry?

Coins have been flying off Coinbase, one of the largest and most prestigious crypto exchanges in the world, and are now at levels not seen since 2015.

As of last week, Coinbase held just 345,000 BTC on behalf of its retail customers, down from around 1 million BTC three years ago, at the height of the bull market.

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Ongoing Trend

The number of coins held on Coinbase has steadily decreased through all market conditions. The decline started at the beginning of 2021, and continued through the first peak above $60,000, during the correction to $30k, through the second peak to $69k, right through the 2022 bear market, and during the 2023 rally.

One of the key drivers for the trend was the collapse of FTX. Users were reminded of the "not your keys, not your coins" message, and raced to withdraw their crypto from all exchanges to wallets they controlled.

The introduction of ETFs has seen falls accelerate further as large financial institutions pull BTC off the market. (Coinbase is also custodian for the majority of the ETFs, but these figures are not included in the chart above.)

ETFs: Ongoing Demand

Altogether, the nine new ETFs have bought almost half a million BTC (over 2% of total supply), though GBTC has seen outflows of around 277,000 BTC.

These coins are likely to be off the market for the long term, and the ETFs represent a source of ongoing demand. A "supply crunch" is on the cards, as demand continues but the number of available coins dwindles.

While this is bullish for bitcoin, Glassnode also note that the market is currently in temporary distribution mode, as long-term holders take advantage of high prices to offload some coins.

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