In a striking development, data from Glassnode reported by Foresight News reveals that only 14.5% of Bitcoin’s total supply is currently held on exchanges, that’s the lowest level in nearly seven years. This milestone reflects a growing trend among investors and institutions alike: the migration from centralized exchanges to cold storage solutions.
Bitcoin Supply and Cold Wallets
This steady decline of Bitcoin held on exchanges is more than just a number, it signals a paradigm shift in crypto custody and investor behavior. Traditionally, investors would leave their Bitcoin on exchanges, ready to trade. But increasing awareness of security risks, regulatory uncertainty, and the importance of self-custody has driven many to withdraw their assets into cold wallets, offline storage devices that are significantly harder to compromise.
Why Cold Wallets Matter
While cold wallets offer the highest level of offline security, it’s also important to consider warm wallets too. Solutions that strike a balance between accessibility and security. Warm wallets, such as Trust Wallet, MetaMask, and mobile phone wallets, are connected to the internet but controlled by the user. These wallets are ideal for active users who engage in DeFi, NFTs, or frequent transactions, offering self-custody with more convenience than cold wallets.
However, because warm wallets are still online, they carry a higher risk of phishing attacks, malware, and unauthorized access. Users are encouraged to practice good operational security (e.g., strong passwords, hardware authentication) when using these solutions.
Cold wallets, such as hardware wallets or air-gapped storage solutions, are not connected to the internet, making them highly resistant to hacking attempts. This level of protection is especially crucial in a landscape where exchanges have historically been high-value targets for cybercriminals.
Over the years, devastating hacks like Mt. Gox (2014), Coincheck (2018), and more recently FTX’s collapse in 2022, have taught users a painful lesson: “Not your keys, not your coins.”
A Gradual Industry Awakening
The journey toward prioritizing self-custody didn’t happen overnight. It’s been a gradual, step-by-step evolution driven by hard-earned lessons and technological advancements:
- 2013–2017: Trust in Exchanges
Early investors largely relied on exchanges like Mt. Gox. After the infamous hack, security became a talking point, but adoption of cold wallets remained niche.
- 2018–2020: Rising Awareness
A wave of exchange vulnerabilities and increased market participation pushed more users toward wallet solutions like Ledger and Trezor.
- 2021–2022: Institutional Entry
As institutional investors entered the space, the need for secure, compliant custody grew. Many adopted cold storage solutions and custodial services like Coinbase Custody, Fireblocks, and BitGo.
- 2022 Onwards: The FTX Effect
The collapse of FTX was a wake-up call for the entire industry. The event triggered mass withdrawals and marked a major inflection point in cold wallet adoption.
Beyond Individual Users: A Shift in Infrastructure
It’s not just retail investors making the move. Crypto funds, family offices, and treasuries are now routinely using cold storage. Exchanges themselves have also improved internal wallet segregation and cold-hot wallet management, minimizing risk.
Additionally, the rise of multi-signature wallets, decentralized custody protocols, and hardware wallet innovation has made it easier than ever to implement strong self-custody practices.
Looking Forward
With only 14.5% of Bitcoin remaining on exchanges, it’s clear the industry is maturing. This shift demonstrates a collective understanding of risk management, and a broader cultural shift in crypto toward sovereignty and security.
While exchanges still serve a critical role in liquidity and onboarding, cold wallets are quickly becoming the gold standard for serious investors.
