The Bitcoin exchange withdrawal has risen to its highest sustained level since 2022, despite assets trading near record highs.
While current outflows are below the accumulation peak in 2023, the updated withdrawal trend highlights behavioral changes in the way investors gain exposure to Bitcoin.
Institutional demand is increasingly flowing through spot exchange trade funds (ETFs), rather than direct purchases, leaving retailers as the main force of on-chain accumulation.
Bitcoin Netflows at Multi-Year Lows
Data from Cryptoquant shows that the 14-day Simple Moving Average (SMA) of Bitcoin Exchange Netflows has moved past the neutral territory, with 7,500 BTC being withdrawn over the past two weeks.
That figure represents a sharp decline from the weekly outflow of 20,000 BTC recorded during the 2022-2023 accumulation cycle exacerbated by the FTX collapse. However, it is at a higher level than any point during the 2021 Bull Run.
Still, Cryptoquant analyst Onchainsschool explained that current withdrawals show an increasing confidence among investors in their flagship digital assets. The analyst said:
“This trend has unfolded despite a new and new hit in recent years, indicating that investors are withdrawing coins from exchanges even when prices remain rising. Such actions usually reflect a decline in long-term value and short-term sales pressures, reinforcing the view that large holders continue to accumulate rather than distribute.”
A strong exchange spill could coincide with bullish stages as investors transfer coins to cold storage and present a long-term conviction.
However, during the initial preparations of 2021, fewer holders retreated to independence, leaving more liquidity behind due to centralized exchange. Once the first top came in, investors began sending coins to exchange at record rates.
Net withdrawals didn't reach the level we see right now until FTX collapsed two years later.
The final cycle saw a softer supply squeeze. This tends to limit short-term upside down pressure even in strong demand.
This time, when Bitcoin is in the price discovery stage, the coins are left to be exchanged at an unprecedented level.
ETF inflow absorbs supply
The pace of withdrawal highlights significant behavioral changes in investors increasingly choosing to expose ETFs over direct Bitcoin ownership. Meanwhile, retail traders are willing to remove their assets from the exchange, and perhaps even migrate to ETFs.
As a result, short-term BTC holders' unrealized profits rose to 10%, while digital assets prices exceeded $126,000 on October 6th.
According to SoSovalue data, 12 registered US funds recorded an influx of around $1.2 billion that day, marking the second-largest daily profit since launch.
Since early September, cumulative inflows have exceeded $5 billion, highlighting the deep role of traditional finances in Bitcoin's liquidity ecosystem.
Bitcoin analyst Sean Edmondson said:
“These purchase numbers from the US Spot BTC ETFs are totally insane both yesterday and five business days. These are really eye watering numbers.”
These ETF vehicles currently collectively hold over 1.3 million BTC, serving as the dominant channel for facility accumulation.
In previous bull cycles, comparable inflows would have been dependent on the exchange of sales, cold storage, or debt protocols. Today they are pouring into regulated storage products, reducing the impact of rarity that once surged prices.
This new balance, robust ETF demand, was offset by weak chain accumulation, making Bitcoin's current rally appear more orderly than in previous cycles. Still, macro headwinds such as US budget tensions and changing rate cut expectations can rapidly change flow conditions.
A sustained ETF inflow could absorb up to twice the amount of Bitcoin's daily issuance, potentially reviving upward momentum without a massive exchange withdrawal. However, if the inflow is slower and some liquidity remains in the exchange, the familiar “supply squeeze” story could remain dormant until the end of the year.
If the outflow increases further alongside the strong ETF inflow, the supply squeeze could hit the “God Candle” level before the end of 2025.
