Bitcoin Supply on Exchanges Drops to 7-Year Low Amid HODLing and Institutional Adoption

Bitcoin's percentage of supply on exchanges has dropped to near seven-year lows, falling below 11% for the first time since March 2018. This significant decrease is attributed to several key factors, including institutional adoption, increased HODLing by investors, and a decline in trust in centralized exchanges post-FTX collapse.

One of the primary reasons for the reduction in Bitcoin's supply on exchanges is the growing trend of HODLing. According to the latest Exchange Flows to Network Activity Ratio chart by CryptoQuant, Bitcoin investors are holding onto their coins at the highest level in over two years. The ratio, which measures the volume of BTC flowing to exchanges relative to onchain network activity, has fallen to its lowest reading since early 2023. This indicates that despite rising prices, there is a subdued level of exchange deposits, suggesting strong conviction among long-term Bitcoin holders who prefer cold storage to trading. This behavior reduces the available supply, with fewer coins potentially up for sale even as Bitcoin nears all-time highs.

Another major factor contributing to the decreasing supply of Bitcoin on exchanges is the rise of institutional custody solutions. Large financial institutions are increasingly opting for third-party custody platforms instead of public exchanges. For instance, Coinbase Prime reported over $212 billion in assets under custody in Q1 2025, driven by inflows from ETF issuers, corporations, and high net worth individuals. In contrast, the Coinbase crypto exchange witnessed over $500 million worth of BTC outflows in the same quarter. This trend has continued into the second quarter, with significant withdrawals observed on June 5. ETFs have attracted a large portion of these Bitcoin, with the net worth of assets managed across spot Bitcoin ETFs reaching $44.54 billion as of June 5, up from around $1 billion at their launch in January last year. A 2025 survey by Coinbase and EY-Parthenon found that 83% of institutional investors plan to increase their crypto exposure, with nearly 60% allocating over 5% of their AUM to digital assets. About 61 public companies already control over 3% of the total Bitcoin supply of 21 million tokens.

The collapse of FTX in late 2022 has also played a significant role in the shift of Bitcoin exchange flows. Following the FTX collapse, there was a dramatic increase in Bitcoin withdrawals from centralized exchanges. The net transfer volume from exchanges showed sustained outflows through early to mid-2023, marking one of the biggest withdrawal periods in Bitcoin’s history. From November 2022 to May 2023, weekly outflows repeatedly exceeded 10,000 BTC, totaling well over 200,000 BTC withdrawn from centralized exchanges. This suggests that trust in crypto exchanges has declined since the FTX collapse, accelerating Bitcoin withdrawals to self-custody and alternative platforms for trading.