This is good but not enough. It would be good if there is more reduction in people's coin holding on exchanges. Exchanges are not for storing coins but for buying and selling coins. You buy or sell and then send the coins to a non-custodial wallet is the best. The only money that should remain on exchanges are the money that traders are using to trade and they should only leave it on exchanges when they are trading not when they are not trading. If they are not trading, they should also move the coins to a non-custodial wallet.

Investors have started to have more confidence in Bitcoin and there has also been more awareness about the dangers of keeping coins in exchange. The fall of FTX might have played a significant role in the change of people's view of keeping coins in exchange. The investment of some big Bitcoin investors might have also contributed to this reduction. Some of them have large chunks of Bitcoin in their custody. Many small investors are also keeping their coins hoping that the price of Bitcoin will keep increasing until they get to right time to sell. My prediction is that there will be an increase in exchange activities early next year.         

I doubt that's the main reason. There have been many exchange hacks in the past, yet people still keep their precious Bitcoins in exchanges. Even with this hack in the past, there was news that investigators recovered enough funds to compensate affected users. The only downside? They didn’t get reimbursed in Bitcoin, so the value was much lower compared to when the hack happened.
FTX cleared to repay billions to customers after bankruptcy plan approval

So, IMO, the main reason here, is the ETF news, especially with BlackRock now holding over 200k bitcoins.

You are right; investors are learning from past mistakes and scams. I also agree that institutional investors are the ones who are refraining more from using centralized exchanges to hold Bitcoins. I just like to add on that I do see people around me (retail investors) changing their attitude toward holding Bitcoins in exchanges as technical awareness around Bitcoin is increasing. People are feeling the power of truly owning money, as everyone here knows it is addictive. 

Indeed we need more reduction as you said but I believe it is a starting of a paradigm shift.


Nothing can match the security of owning your keys (as you mentioned). Investing in ETF is kind of the same in the sense of trusting a third party, which is the genesis of all major problems with the current fiat system. I am agreeing with you from the profit point of view, but philosophically, I prefer self-custody any day. 

I do not think so. IMO Bitcoin will shook the very foundation of centralized exchanges (as it was meant to be). We are entering in a new era of Bitcoin dominance which will open new possibilities.

True! It can lead to volatile price action on exchanges. Even I was expecting it to be significantly higher then 3 million.
Though bankruptcy might be rare but exit scams are not so rare

 

As long as there are so many people believe that storing their coins in exchange is the most convenient these numbers will never fade out. This should be came up on the mind of people that exchange is for buying and selling. But many still got caught on the idea that they can continuously earn if they trade their bitcoin that's why people choose to store their bitcoins at that platforms.

People need to know that once they let their coins stored in their exchange account there's huge possibilities that they might lose it for any unwanted circumstances. That's why its really better to take out their money there and left only those funds they can afford to lose or trade. To HODL using this exchange is the dumbest idea they do since we know its so risky to do this.

And this could be one positive offshoot of the FTX collapse, before we have heard a lot of traders or investors losing their money because they have left it in a exchange. We would forget the Quadriga: The cryptocurrency exchange that lost $135m. Founder was found dead in India in 2019, keeping with him all that money that those traders have left in that exchange. But still we didn't learn from our mistakes until SBF and his FTX collapses bringing down a billion dollar empire.

So it's good that at least investors now holds their private key and that they have total control of their Bitcoins.
And most likely they know that this is going to be the biggest bull run ever, so we better have the best security protocol, and that no one has accessed to it except us.

The declining Bitcoin supply on exchanges indeed reflects a shift toward self-custody, but it is not about "not selling." Recent data puts a big role on institutional adoption, such as ETF inflows. For example, Bitcoin ETFs have inflows of $950 million because of optimism about its gain in the future. With reduced exchange reserves, it signals bullish sentiment, but at the same time, liquidity tightens. That could increase volatility if leveraged traders and sudden spikes in demand join the mix. This is neither absolutely "good" nor absolutely "bad," but rather a sign of a maturing, complex market.

The trend has surely started moving into the right direction but it has a long way to go, still!

I believe some previous instances are finally sinking into the investor's mind and they have also started realizing that "not your keys, not your Bitcoin" statement is very true! Good to see that a lot of investors are choosing to have their old cold storage for their bitcoin. Which also means, that a lot of investors are not willing to sell their Bitcoin right at this moment. They want to hold onto it for a longer period of time before thinking about selling the coins.

It's good for those people who didn't hold their bitcoin in an exchange and it's not good for those people who wants to accumulate bitcoin when exchanges have now low supply of bitcoin. Anyway, there's a reason as explained in the post above and it's also not really ideal to store bitcoin in an exchange. Did you know about not your keys not your coins?. That's also the reason why it's best not to store or hold your crypto in an exchange but to a self-custody crypto wallet.