Bitcoin and Ether Holders in Command: Exchange Supply Dwindles, Goldman Sachs Takes Notice

• Goldman Sachs reports a decline in Bitcoin and Ether supply on exchanges in June, indicating a growing trend of self-custody among cryptocurrency holders.
• Despite the dip in exchange supply, Bitcoin miners sold inventory in record numbers, capitalizing on the cryptocurrency’s strong performance.

The past month saw a notable reduction in the availability of Bitcoin (BTC) and Ether (ETH) on exchanges, according to a recent Goldman Sachs report. Using on-chain data, the financial behemoth pointed to increased regulation and concerns over cybercrime as reasons behind holders preferring self-custody over keeping their assets on exchanges.

Cryptocurrency Holders Lean Towards Self-Custody Amid Regulation and Cybersecurity Fears

The supply of Bitcoin, the leading cryptocurrency by market cap, fell by 4% in June, nearing the low levels seen in December 2022 — the lowest since November 2020. Ether followed a similar trend, with supply dropping by 5.8%, a figure not observed since May 2018.

Goldman Sachs suggests that this shift is due to several factors. Regulatory uncertainties surrounding major centralized spot exchanges have put investors on edge. Persistent concerns over cybercrime in the cryptocurrency sphere have reinforced the value of self-custody. Adhering to the “not your keys, not your coins” principle, asset holders have been demonstrating a clear preference for managing their own cryptocurrency. Additionally, for Ether holders, the ability to withdraw staked Ether has encouraged investors to stake their Ether rather than keeping it passively on exchanges.

Ironically, as the supply on exchanges fell, June was a record-breaking month for Bitcoin miners’ inventory sales. Miners took full advantage of Bitcoin’s strong performance, and the total monthly BTC inflows from miners to exchanges nearly doubled from May to $99 million. During this time, Bitcoin’s price increased by nearly 12%.

Furthermore, as transaction fees normalized following the network congestion in May, Bitcoin and Ether saw a monthly rebound in address activity of 15.5% and 37.5%, respectively. Goldman Sachs also noted that the average daily Ether burnt fell by 65.1%, and average daily fees dropped by 63.3% month-on-month.

Finally, new on-chain activities saw a considerable uptick last month, with the daily average new address count for Bitcoin and Ether increasing by 9.8% and 48.2% compared to the previous month. The transition to self-custody and these on-chain developments all underscore the ever-evolving dynamics of the cryptocurrency market.