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

The data shows that while Bitcoin supply has fallen on exchanges, it has not been reflected in growth in other investments vehicles such as ETFs or WBTC.

Bitcoin Exchange reserves fall, but ETF and other instruments enjoy growth

Arcane Research’s latest report shows that BTC currency reserves are in decline, however, the increase in ETFs and other investment tools has compensated.

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

This supply was traditionally considered to be the total trading supply for the coin. So, when the indicator’s value moves up, it’s taken as a bearish sign for the coin’s price. A decrease in the indicator’s value could indicate a bullish trend.

For the past half year, the trend has been to see an increase in foreign exchange reserves. Because of this “supply shortage”, many traders believe in a bullish outcome for Bitcoin in the long term.

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But the report appears to show a very different story. Below is data showing the different percentages of the BTC supply that are circulating in each segment.

Bitcoin Percent Circulating Supply

Most sectors show growth, according to The Arcane Research Weekly Report - Week fifty| Source: The Arcane Research Weekly Update - Week 50

The graph above shows that while exchange supply is down, it seems like growth in other sectors has more than compensated.

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The supply of investment vehicles that are exchange traded is now 0.69% greater than it was last year. This indicates that Bitcoin trading is becoming more popular via the traditional means of ETFs. This could also be a sign of rising institutional adoption.

BTC from the Ethereum network accounts for 1.73 percent of total circulating supply, a rise of 0.98%.

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.

Corporate treasuries hold now 0.91% (in BTC) of the total circulating supply. The main driver of this expansion has been microstrategy.

BTC Prices

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

The chart below shows how the cryptocurrency price has changed over the course of five days.

Bitcoin Price Chart

BTC seems to be on the rise in price over the last few days. Source: BTCUSD at TradingView| Source: BTCUSD on TradingView's featured image. Charts by Arcane Research:

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