Trending to ZERO: Exchange BTC Reserves | What’s Next? ₿ | Hashpower Academy

Video Transcript:

hello there and welcome to the Hash Power Academy your place to learn everything and anything to do with Bitcoin the topic of today’s video is understanding that the continuation of just about everything and everyone trying to gobble up all of the spot Bitcoin which is not just buying into futures and options and cash settled instruments but actually the bearer Bitcoin on exchanges now right now Bitcoin on exchanges represents in dollar terms about I’ve seen from some exchanges 30ish% and some it’s 40% so the fact that the significant majority of asset on exchanges is just Bitcoin whether that’s the exchanges own Bitcoin customer Bitcoin and that difference between their assets and liabilities and the rest of the assets you’ve got something like USDT which is a always a big chunk and then and it granularly gets smaller and smaller from there so we’re talking about the largest most significant most important asset across exchanges and trading pairs continually in decline as all of the Bitcoin gets pulled off of exchanges over time and we see this continuation happening non-stop year-over-year and it’s the same dynamic that mining has where uh you earn a smaller quantity of Bitcoin over time with uh a greater price to it so the dollarized value represents a a decent amount of pie chart um but that quantity is diminishing whilst all of the other assets in quantity terms are increasing with issuance now here’s the thing with Bitcoin being pulled off exchanges there’s less Bitcoin to trade there’s less liquidity so you’ll naturally see thinner order books on the top side now what this does is a couple of things you’ve got less liquidity which means more volatility and that aspect of the nature of people huddling Bitcoin if there’s less uh if there’s less Bitcoin to be moving around on all these different order books on the internet uh because it’s being pulled off into cold storage into Michael Sailor’s uh uh everything that he’s doing and what this does is it creates wider spreads new incomers to Bitcoin that want to go and buy Bitcoin if there’s if there’s a thinner order book there’s naturally more spreads and you got to think of the other way around uh on the exchange side of things having having the significant majority um of their potential revenues from Bitcoin trading pairs which tend to be the ones of highest volume and I I assume the highest fees all of that sort of culminates that more risk more risk steps in when it comes to having your Bitcoin on exchanges it’s not to say it’s a slowmoving bank run but that’s something close to it and what we see over time and this is this is the trend of balance on exchanges has just been continually in decline there’s a few moments where there’s a there’s an increase of the prices crash so a load of Bitcoin floods onto exchanges but it’s that diminishing aspect of the the quantity of Bitcoin on exchanges inevitably going down now I have my own ideas as to how to help uh exchanges uh boost liquidity with high compliance health bitcoin it’s called mining and naturally you’ve got the farm and the farmers market so to speak as a natural circular economy with compute potentially in the middle and on the other side of that security aspects if exchanges suffer a situation where the number one asset on their exchanges is both in decline more volatility less fees they’re going to take more risk and the security aspects of you personally having your Bitcoin on exchanges just continues this trend until there’s just such a small amount of Bitcoin on exchanges that yeah every bull cycle people experience um this endless rush into certain assets and markets and exchanges and they take risk and they take a lot of risk if if if the asset coming in is is is continually in decline relative to withdrawals coming out so be very careful this bull cycle and if you’re questioning and doubtful of anything it’s always good to make sure you’ve got your same computational Bitcoin eggs not in different baskets but a decent amount in cold storage and don’t take one singular decision to any of these yield treasury stocks and sailor and don’t put it all in one that’s the key thing have a decent chunk in self-custody and if you’re looking for yield and cash flows explore mining it’s the most intrinsic natural yield to the Bitcoin network um on the other side of that you’ve got infinitely more dollars chasing fewer and fewer sats so we’re just going to see the price absolutely rocket but you’ve also got to think and consider about it’s not just the spot Bitcoin side of things you’ve got this futures and cash settled with larger institutions doing something called delta neutrality which is they’ll buy the Bitcoin spot and short it on the futures side at the same time and what this does is they’ll capture the funding rates of retail investors flooding into the exchange going into leverage to push the Bitcoin price up paying funding rates and the large institutions on the other side are just capturing that volatility and they don’t care what the price does the other strategy to that is they are accumulating spot Bitcoin and holding a futures posit position against it capturing those funding rates and fees and they just want the prices to go sideways and maybe upwards um over time as long as possible so that they can accumulate as much spot bitcoin as possible because typical futures positions only need a margin to hold as as the collateral against the position so yeah I think that’ll be it for today’s video thank you for listening hope you enjoyed hope this was a different sort of perspective and I will see you in the next video goodbye