Bitcoin and Ethereum user balances have dropped to levels not seen since 2020.

Glassnode data revealed that user balances of Bitcoin (BTC) and Ether (ETH) on centralized exchanges reached a four-year low as investors held out for higher prices in a bull market. 

BTC balances dipped to below 2.3 million coins, valued at around 0 billion, while ETH balances have dropped below 16 million, amounting to less than billion.

Why Bitcoin and Ethereum exchange levels dropped

The amount of BTC and ETH on exchanges has been in a downtrend since before July 2020, per Glassnode. Data confirmed that users continued to withdraw assets from these platforms following the pandemic, through the previous 2021 peak, during the 2022 Terra-FTX contagion, and even after spot BTC ETFs were approved. 

The four-year pattern suggests that crypto users have adopted a bullish long-term outlook, expressing confidence in the future appreciation of these assets regardless of market cycles. 

After the COVID-19 crisis in 2020, inflation also rocked world economies and incentivized investors to station capital in technologically sound vehicles. Bitcoin’s hard-capped supply and immutable design bolstered its status as an inflation hedge and sovereign nations like El Salvador have adopted the cryptocurrency as legal tender.

The bullish thesis is perhaps solidified even further as Wall Street behemoths like BlackRock and Fidelity drove institutional demand through spot BTC ETFs. Companies like MicroStrategy under BTC maxi Michael Saylor have also parked billions in the top digital asset. 

As the second-largest crypto and top altcoin asset, ETH commands its own bullish thesis as the leading substitute for BTC. The token powers the biggest decentralized finance (defi) ecosystem worth nearly billion per DefiLlama. 

In 2020, developers launched the Beacon chain, which kicked off the eventual transition from proof-of-work (PoW) to proof-of-stake (PoS). The move unlocked Ether staking, a process of locking up ETH for network security and passive yield. 

At press time, over 27% of Ethereum’s supply was staked. In other words, users have deposited over 9 billion worth of ETH in staking providers like Coinbase, Lido, and EigenLayer. 

The hype around spot ETH ETF approvals, defi growth, and staking surges has culminated in a positive outlook for the cryptocurrency and has further encouraged users to hold on for dear life, otherwise known in the crypto community as “hodl.”