Bitcoin liquidity is finding different routes

Since the inception of Bitcoin, trading has primarily taken place either through over-the-counter (OTC) transactions or crypto exchanges. However, since the launch of Bitcoin ETPs (exchange-traded products) in 2014, these products have gradually eroded the dominance of exchanges and OTC trading. More recently, this trend has accelerated significantly.

Looking at ownership trends over the past decade, the number of investors holding Bitcoin for 155 days or more is now at its highest level since 2015. While the motivations for holding Bitcoin back then differed from today's, the broader trend suggests that investors are increasingly adopting a long-term holding approach, treating Bitcoin more as a store of value. Currently, more than 74% of investors hold their Bitcoin for over 155 days.

Over the same period, the share of Bitcoin held on exchanges peaked at 18% of total supply in June 2022 (3.45 million BTC, valued at US$383 billion). This has since declined to just 14%, marking a 16.6% reduction and removing roughly US$65 billion from exchange holdings. Similarly, the volume of Bitcoin held in OTC desk wallets has fallen to near zero.

Bitcoin trading volumes have also declined. Over the past month, average daily volumes on exchanges have dropped to around US$6 billion, down from US$15 billion at the start of the year.

At first glance, this may appear counterintuitive, particularly with Bitcoin trading near all-time highs, and potentially concerning. However, we believe it reflects a fundamental shift in investor behaviour. Notably, the total inflows into US-based Bitcoin ETFs since the decline in exchange-held supply closely match the outflow, US$68 billion, suggesting capital has simply migrated to a different trading venue.

This shift is most evident in trading volume data. Since the launch of US spot Bitcoin ETFs, ETPs have become an increasingly dominant channel for Bitcoin trading. Beyond the initial surge in activity at launch, ETPs have averaged 48% of daily Bitcoin trading volume over the past month, equating to roughly US$3 billion per day.

This evolution indicates a major transformation in how Bitcoin is traded, one that favours regulated, accessible, and familiar financial infrastructure, such as exchange-traded funds. We believe this shift does not undermine the Bitcoin network itself, but rather reflects a diversification in trading mechanisms beyond centralised crypto exchanges.

In parallel, we are also witnessing the rise of new ways for investors to gain crypto exposure. For instance, there are now around 40 listed companies classified as Bitcoin treasury firms, defined as those holding more than 20% of their net assets in Bitcoin. Remarkably, these companies have generated combined daily trading volumes of US$6.5 billion over the past month, surpassing the total daily trading volume of the FTSE 100.

The way investors engage with Bitcoin is undergoing a fundamental transformation. What began as a grassroots, decentralised market built around exchanges and OTC desks is steadily giving way to more institutional, regulated, and mainstream financial vehicles. The rise of Bitcoin ETPs and ETFs marks a turning point, not just in how Bitcoin is traded, but in how it is perceived. Long-term holding behaviour is increasing, suggesting growing confidence in Bitcoin as a store of value rather than just a speculative asset. Meanwhile, the sharp decline in exchange-held Bitcoin and the emergence of listed Bitcoin treasury companies point to a decentralisation of access points and a diversification of investor strategies. Far from signalling weakness, these shifts reflect Bitcoin's growing integration into the broader financial ecosystem. The network remains intact, but the rails of access are evolving, reaching a broader set of investors.