Growth Of Bitcoin ETFs & Other Instruments Doesn’t Support Supply Shock Narrative

Keshav Verma

3 years ago

3 mins read

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Data shows while the Bitcoin supply present on exchanges has been trending down, growth in other investment vehicles like ETFs and WBTC has been making up for this drop.

Bitcoin Exchange Reserves Decline, But ETF And Other Instruments Enjoy Growth

As per the latest report from Arcane Research, BTC exchange reserves have seen significant decline this year, but the growth in newer investment instruments like ETFs has made up for it.

The “exchange reserve” is an indicator that measures the total amount of Bitcoin currently stored in wallets of all exchanges.

Traditionally, this supply on exchanges has been considered the available trading supply of the coin. So, when the indicator’s value moves up, it’s taken as a bearish sign for the coin’s price. On the other hand, a decrease may imply bullish trend.

The trend with the exchange reserve has been that of constant decline since half a year now. Because of this “supply shortage”, many traders believe in a bullish outcome for Bitcoin in the long term.

However, the report seems to suggest a different story. Here is some data that shows the percentage of the circulating BTC supply in different segments:

Looks like most sectors have seen growth in the past year | Source: The Arcane Research Weekly Update - Week 50

As you can see in the above graph, while the exchange supply has gone down, growth in other segments seems to more than make up for this decline.

The exchange traded investment vehicles now hold 0.69% more supply than last year. This shows that there is increasing demand for trading Bitcoin through the familiar means (like ETFs). This trend may also indicate rising adoption from institutional investors.

With a 0.98% increase this year, BTC on the Ethereum network now accounts for 1.73% of the total circulating supply.

The report notes that both these sectors are important factors for Bitcoin’s price discovery, and so growth here may not support the popular idea that a supply shock is brewing in the crypto due to declining exchange reserves.

By the way, corporate treasuries now hold 0.91% of the circulating BTC supply. Microstrategy has been the main push behind this growth.

BTC Price

At the time of writing, Bitcoin’s price floats around $48.8k, up 1.5% in the last seven days. Over the past month, the crypto has lost 16% in value.

Below is a chart that shows the trend in the price of the crypto over the last five days.

BTC's price seems to have surged up in the past couple of days | Source: BTCUSD on TradingView

Featured image from Unsplash.com, charts from TradingView.com, Arcane Research

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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