In 2025, the cryptocurrency market continues to mature, and investor behavior is evolving rapidly. A recent report from on-chain data platform Santiment highlights a significant industry trend: the supply of Ethereum (ETH) and Bitcoin (BTC) on exchanges has reached multi-year or even historic lows.
According to Santiment’s data, as of May this year, the supply of Ethereum on exchanges dropped to just 4.9% of its total supply—the lowest level in over a decade. Similarly, Bitcoin’s exchange holdings fell to 7.1%, the lowest since November 2018. In other words, more and more ETH and BTC are flowing out of centralized exchanges into long-term storage wallets or decentralized platforms for use and staking.
This shift in data is not just a reflection of market dynamics but also a clear indicator of structural changes in the broader crypto ecosystem. Over the past five years, around 1.7 million BTC and a staggering 15.3 million ETH have been withdrawn from exchanges. This trend suggests that a growing number of cryptocurrency holders are choosing to move their assets away from exchanges into more secure or yield-generating alternatives such as hardware wallets, staking contracts, or decentralized finance (DeFi) platforms.
Why Ethereum Exchange Supply Is Declining
Ethereum has undergone significant changes since "The Merge," which transitioned the network to a Proof-of-Stake (PoS) consensus mechanism. Staking ETH has become a popular method for earning consistent rewards, encouraging users to lock their tokens in the network rather than keeping them on exchanges. This behavior directly reduces the available supply on trading platforms and reflects growing confidence in Ethereum’s long-term value.
Bitcoin’s Shift Toward Self-Custody
Bitcoin, often regarded as "digital gold," is increasingly recognized for its anti-inflation and safe-haven properties. Both institutional and individual long-term holders are showing a stronger preference for self-custody, reducing exposure to potential security risks associated with exchanges. High-profile hacking incidents and regulatory actions across various regions have further motivated users to take control of their private keys and secure their holdings off-exchange.
Market Impact of Reduced Exchange Supply
One major consequence of this trend is changing market liquidity. With fewer coins available on exchanges, price movements could become more volatile in response to shifts in supply and demand. While this may present greater trading opportunities, it also introduces higher uncertainty for market participants.
On a positive note, the migration of assets away from exchanges may signal the market's growing maturity. It indicates that users are less focused on short-term speculative trading and more interested in long-term holding, network participation, and real-world application of crypto assets. The rise of DeFi, NFTs, and on-chain governance has further enabled this shift—transforming digital assets from mere trading instruments into functional on-chain resources.
Frequently Asked Questions
What does reduced exchange supply mean for cryptocurrency prices?
Lower exchange supply often indicates that fewer coins are available for immediate selling, which can reduce selling pressure. However, it may also lead to higher volatility when large buy or sell orders enter the market due to thinner order books.
Why are people moving crypto assets off exchanges?
Users seek better security, ownership control, and opportunities for earning yields through staking, lending, or participating in DeFi protocols. High-profile exchange failures and regulatory uncertainty have also accelerated this shift.
How does staking contribute to reduced ETH supply on exchanges?
Staking requires users to lock up their ETH in official contracts or decentralized platforms to help secure the network and earn rewards. This reduces the liquid supply of ETH available on centralized exchanges.
Is self-custody safer than keeping crypto on an exchange?
While self-custody gives users full control over their assets, it also requires careful management of private keys. Exchanges offer convenience but come with counterparty risk. It's essential to assess personal security practices and risk tolerance.
Will this trend affect market liquidity long-term?
Yes, as more assets are held in cold storage or staking contracts, trading liquidity may decrease, potentially increasing volatility. However, growing DeFi liquidity pools could partly offset this effect.
What are the best alternatives to storing crypto on exchanges?
Popular options include hardware wallets, non-custodial software wallets, and decentralized staking platforms. Users may also explore secure off-exchange storage solutions for long-term holding.
In summary, Santiment’s data reveals a pivotal shift in the crypto industry: investors are showing stronger belief in decentralization and long-term value. With Ethereum and Bitcoin exchange reserves hitting record lows, the market is transitioning toward a more mature, utility-driven phase centered on secure storage and real-world application.