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In the past few weeks, Bitcoin has continued to see immense volatility, with its price falling below $50k. This factor seems to be having an effect on the supply of the asset on exchanges.

According to Santiment’s on-chain data, on Dec. 13, 2021, the supply of Bitcoin on exchanges saw a 21-month low at 11.96% of the total supply of the asset.

Santiment revealed that this supply decline should be viewed as a positive outlook because it indicates limited chances of significant sell-offs. Note that the supply of Bitcoin on exchanges is a significant indicator of the entire activity of the Bitcoin network. This is because it signals the direction of the asset in short to medium term.

Santiment said:

“Prices have been volatile as of late, but the lack of BTC moving to exchanges right now is a positive sign that significant selloff risk should be limited.” 

The assumed logic behind this dip is that more Bitcoin has been transferred off exchanges, possibly to cold storage wallets, as investors have become bullish concerning the value of Bitcoin in the long term.

This aspect fuels a reduced selling pressure as investors believe that the bearishness may be reverting gradually to a more supportive outlook.

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