Coinbase’s Bitcoin holdings hit nine-year low

Coinbase’s BTC holding: Coinbase, a leading cryptocurrency exchange, has witnessed a strong decline in its Bitcoin holdings, marking a nine-year low as users transfer a substantial portion of their assets off the platform.

According to a report from CryptoQuant, large investors, often referred to as whales, have shifted 18,000 Bitcoin, valued at approximately $1 billion at current prices, away from Coinbase over the weekend. Transfer amounts ranged from $45 million to $171 million, contributing to a reduction in Coinbase's public order book to around 394,000 BTC, estimated at $20.5 billion.

The movement of Bitcoin away from centralised exchanges like Coinbase is typically interpreted as a bullish indicator, as it signifies a reduction in available supply for sale. However, opinions on social media vary regarding the motives behind these transfers. Some speculate that investors are relocating funds to custodial wallets in anticipation of a forthcoming price surge, particularly with the approaching Bitcoin halving, scheduled in two months, expected to create a supply shock. Others suggest that the transferred funds may be earmarked for over-the-counter (OTC) trades to provide liquidity.

Concerns have also been raised about the accuracy of interpreting these transfers as individual withdrawals, given that a significant portion of assets held on exchanges may not be owned by the platforms themselves.

Bitcoin halving events, occurring approximately every four years, result in a reduction in the rate of new Bitcoin issuance, contributing to a supply shortage as demand persists or grows. The upcoming halving, set for April at block height 740,000, will reduce the block reward from 6.25 BTC to 3.125 BTC per mined block. This reduction coincides with heightened institutional interest, highlighted by the approval of 11 spot Bitcoin exchange-traded funds (ETFs) in the United States in January.

Despite a daily mining output of around 900 BTC, institutional demand remains robust, with Bitcoin ETFs witnessing daily net inflows of approximately half a billion dollars or roughly 9,650 BTC, notwithstanding significant outflows reported by Grayscale's GBTC product.

Following the April halving, daily Bitcoin issuance will decrease to approximately 450 BTC, while institutional appetite continues to grow. Historical trends suggest that such supply-demand imbalances tend to drive bullish momentum in Bitcoin prices, often leading to new all-time highs within a year of the halving event.

Currently, Bitcoin is trading at around $52,000, representing a 25 per cent decrease from its peak value of approximately $69,000 recorded in December 2021.