Since 2020, nearly all exchanges have seen their Bitcoin holdings decrease. Even during the Bear Market, a period where exchanges usually like to buy back at low prices. The Supply Shock is coming…

This bear market‘s probably biggest message was how we should not trust centralized exchanges no matter what. But meanwhile we obviously all also know that through the years and a full decade even, they have become an essential part of Crypto as our fiat on/off ramps and trading hubs of Crypto assets with Margin, Leverage, Futures and what not.

Even if they are so essential, they right now do not seem to be in a good spot at all. Apart from all the regulatory issues arising right now, one of their biggest issues and fears still remains, simply the Supply.

Those Exchanges are meant to be able to give you the Crypto you ask for in exchange of fiat currencies, but what if they do not have that much Crypto left? Especially in a Bull Market where people buy a lot this could get ugly very quickly.

​

Bitcoin Supply on exchanges; Chart by James V.Straten

This state, which we can call Supply Shock, can be perfectly seen with the flagship Crypto itself, Bitcoin. The Bitcoin supply (as seen on the chart) has decreased from nearly all exchanges, with the only exceptions being Binance and Bitfinex (both used a lot for Leverage).

But the possibilities of a Supply Shock on exchanges for Bitcoin remain real and with Bitcoin we should remember that there are only 19M in circulation right now and a large part (78%) is illiquid and also lost forever (14%). So not much supply remains for them to buy. It is also speaking quite a lot that in this bear market there seem to not have been any big buy-backs by exchanges, even though historically exchanges have always been ramping up their supply again in Bear market.

So, I know long post and a lot of numbers, but what do you think, is a Supply Shock of Bitcoin on exchanges something we may face in the near future?