# Behold the power of Defi...

As I type, more and more bitcoin are leaving centralized exchanges.

Keep in mind that this is still a relatively high total, but given where the numbers were just a few months back, we are dramatically lower.

Why is that?

For starters, lets take a look at the trend...

Basically since bitcoin was created the balance of bitcoins sitting on exchanges has mostly continued to go up, until now.

Check it out:

![](https://images.hive.blog/DQmep2KdJQB7W7y9W8RMHTQmUHCmHnk5cya645Udc1ZELHa/image.png)

(Source: https://twitter.com/cryptounfolded/status/1284435243328344064/photo/2)

Besides one rather significant drop in late 2016, the trend has clearly been up, until now.

Currently we are seeing the largest draw-down in BTC holdings sitting on exchanges in bitcoin's entire history, on a percentage and absolute basis.

The total balance sitting on exchanges seemed to peak right around the turn of this calendar  year.

# Why the shift?

That is the 64 thousand dollar question!

All things considered, bitcoin leaving exchanges is a bullish thing.

Less supply sitting on exchanges means less selling when the price starts moving higher.

Though it is interesting to wonder why there has been a shift recently... and that shift likely has nothing to do with people suddenly wanting to hold their own coins or anything like that.

Nope, that shift likely has to do with a couple things, "Defi" and "Arbitrage".

As I mentioned in a previous post, hedge funds have been moving their bitcoin holdings to the Grayscale Investment Trust for much of this year. 

The reason being that they are getting a nice little premium (arbitrage) on their holdings as GBTC shares continue to trade at a premium to the "in-kind" trade ins these hedge funds are doing.

More on that can be seen here:

https://hive.blog/hive-167922/@jrcornel/hedge-funds-woke-up-to-the-best-kept-secret-in-crypto

# The chase for yield...

Grayscale may have been the talk of crypto earlier in the year, but lately there's been another popular topic in crypto land.

Defi has been taking the crypto world by storm over the past couple months but it really has been playing a major role for basically all of 2020.

Traditional investment products are being developed and deployed in the crypto space much to the delight of hungry crypto investors.

The higher the yield the more attractive they have become.

Due to this we have also seen projects like Blockfi and Blockchain.com start to offer extremely high yields just for parking your coins on their platform.

Yields in the range of 5-8% are not uncommon...

Now if large investors, who were mostly planning on holding anyways, are offered the opportunity to earn 5-8% on their bitcoin holdings while they wait for it to up or just park it on an exchange and earn nothing, which one do you think they are going to choose?

I think they above chart shows very quickly what investors are starting to do.

As it stands now there are at least 25 major defi projects that use bitcoin.

It will be interesting to see if this trend changes anytime soon. I for one don't see it changing anytime soon unless bitcoin goes on a massive price run, which it may start to do in the near future here.

Interestingly enough, the more coins we have taken off of exchanges, the higher the impending rally probably goes, so there is that.

Thank you Grayscale and Defi!

Stay informed my friends.

-Doc

Posted Using [LeoFinance](https://leofinance.io/@jrcornel/more-and-more-bitcoin-is-being-transferred-off-of-exchanges-but-why)