Recent on-chain data shows that the percentage of Bitcoin volume occupied by exchanges has increased significantly, reaching all-time highs.
This surge in exchange volume dominance, as reported by on-chain analytics firm Glassnode, has important ramifications for understanding the current state of Bitcoin activity.
The percentage of total Bitcoin on-chain volume flowing through centralized exchanges is referred to as exchange volume dominance, and it serves as an indicator of user engagement in buying and selling activities.
High levels of exchange volume dominance imply that BTC users are more interested in active trading on these platforms.
Lower values of exchange volume dominance, on the other hand, indicate that self-custodial transactions, such as over-the-counter (OTC) trades or peer-to-peer (P2P) transactions, are currently the dominant forms of movement on the blockchain. This shift suggests that investors prefer trading methods other than traditional exchanges.
Another point to consider is that low exchange volume dominance does not always imply a thriving off-exchange market.
In some cases, it may reflect an overall inactive network with relatively low exchange and non-exchange volumes.
The exchange volume dominance indicator reached a new all-time high (ATH) of 77.4% during the recent surge. Although it has slightly declined, now hovering at 76.4%, these levels are historically significant.
