• Self-custody of Bitcoin is on the rise, resulting in a decreased circulation and market capitalization.
• There is no way to measure the amount of Bitcoin being sent to self-custody wallets so far.
• Despite stagnation caused by self-custody, exchange activity has been enough to cancel out its negative impact.

Self-Custody on the Rise

Amid fear and uncertainty over lawsuits against major cryptocurrency exchanges, investors have been increasingly sending their Bitcoin to self-custody wallets. This is causing a decrease in circulation and reducing market cap tracked by websites like CoinGecko and CoinMarketCap. According to data from crypto intelligence platform Santiment, BTC’s exchange supply has fallen to its lowest level since February 2018.

Unmeasurable Bitcoin Amount

Brian Quinlivan, head of marketing at Santiment told Cointelegraph there is no way to measure the amount of Bitcoin (BTC) that is being sent to self-custody wallets so far. Stagnancy resulting from this trend can have a negative impact on market cap due to lowered network utility. However, as long as exchange activity remains healthy, it should be able to counteract this effect.

Exchange Supply Plummets

Since Black Thursday in March 2020, Bitcoin’s supply on exchanges has plummeted from 16.1% all the way down to 9.8%. Prices are still up 283% during this time span despite the massive outflow from exchanges due to self-custody growth fueled by uncertainty around Binance and Coinbase according to Santiment’s data .

Unmeasurable Exchange Outflows

Quinlivan mentioned that traders often assume if massive amounts of tokens are moved off exchanges by whales prices will immediately rise; however they usually see more gradual rises instead. He stated that while coins moving off exchanges have more of a long term impact than an immediate one it’s not quite possible yet for them or anyone else in the industry track how much BTC sits on cold wallets currently either due to its unmeasurability for now.

Conclusion

The increasing trend towards self custody has had an overall positive effect on cryptocurrencies markets even though it decreases circulation decreasing market capitalization tracked by websites like CoinGecko and CoinMarketCap but higher levels of exchange activity throughout this period has been enought counteract any negative effects for now untill we can accurately measure how much BTC sits on cold wallets currently