The amount of Bitcoin (BTC) held on Binance, the world’s largest cryptocurrency exchange, has fallen to its lowest point in years.

Despite the drop, analysts argue that the trend is a reflection of growing confidence, strengthening demand from institutions, and a tightening supply backdrop that historically supports higher prices.

Self-Custody, ETF Demand, and Derivatives Cleanup Shape the Trend

According to XWIN Research Japan, the ongoing drain in Binance’s BTC reserves is not the warning sign it might appear to be at first glance. Instead, it means that long-term investors are shifting their assets into private wallets, which typically happens during confident market phases when large holders prepare to hold rather than sell.
At the same time, capital is flowing into U.S. spot Bitcoin ETFs from firms such as BlackRock and Fidelity, with custodians holding these assets off-exchange. With ETF balances climbing and liquidity shifting towards institutional platforms, centralized exchanges naturally see fewer BTC in their wallets.

XWIN analysts noted that this realignment showcases a maturing market structure rather than weakness. Recent turbulence in derivatives markets has also contributed to the dwindling reserves. The late-November slump triggered heavy liquidations across Asia-based traders, shrinking margin deposits and reducing the BTC held on Binance.

A recent change of fortune in the asset’s valuation has been notable, when more than $300 million in Bitcoin shorts were wiped out on December 2 as the premier cryptocurrency bounced back above $91,000. That spike in liquidations came just a day after the asset plunged below $85,000, exaggerating flows in and out of exchanges.

Meanwhile, some users are also redistributing funds as Binance implements new compliance measures globally, suggesting while this shift has impacted reserves, it reflects structural adjustments rather than fear-driven exodus.

Market Structure Improving as Institutional Signals Strengthen

XWIN is not alone in its optimistic view. Another market analytics group, Arab Chain, has pointed to additional signs from U.S. markets, indicating the setup may be healthier than recent volatility implies. The firm highlighted a positive reading on the Coinbase Premium Index, which is now at +0.03, following a month of persistent selling by U.S. investors.

Historically, a higher premium signifies renewed interest from institutions, given that Coinbase functions as a primary conduit for American funds. Liquidity measures on Binance have also started to improve, and the price gap between Binance and Coinbase has narrowed, indicating more balanced capital flows.

Arab Chain states that when both indicators trend in the same direction, the market often stabilizes before pushing higher. Bitcoin’s latest price movements support that perspective. In the past 24 hours, it has surged approximately 7% and is now trading near $93,000 according to CoinGecko data. The performance over the last week is also positive, with BTC gaining 6% during that time, although it has declined by around 13% for the month following the steep November drop.