Data from CryptoQuant shows that the market embraced institutional inflows in 2025 without abandoning its historical preference for flexible custody and low-friction trading platforms.
At the center of this reallocation is the exchange reserve ratio, a measure comparing the amount of BTC held on different types of exchanges. As of June 11, the reserve ratio between KYC and non-KYC exchanges had fallen to 1.33, down from 1.46 at the end of December.
That 9.1% drawdown reflects a broader trend of liquidity quietly migrating out of regulated venues, despite the rollout of spot Bitcoin ETFs in January and the subsequent inflows they generated.
The same pattern appears when comparing reserves on US-domiciled exchanges to offshore venues. For the first time in years, offshore exchanges hold more BTC than their US counterparts, with the US/offshore reserve ratio flipping negative on Jan. 1 and falling to -0.22 by mid-June.
The pace of this decline has remained steady throughout Bitcoin’s rally in the first quarter and the subsequent consolidation in the second quarter, with little evidence that the landmark approval of ETFs last year or the repeal of SAB 121 meaningfully reversed the trend.
Volume patterns reinforce this shift. Daily spot trading volume on KYC-compliant platforms fell by 18.6% between January and June, dropping from an average of $424,700 worth of BTC per day to $345,800. Non-KYC exchanges also experienced a slowdown, with average volumes down 15.3%, but their share of total spot activity rose from 12.8% to 14.5%. This subtle increase suggests a rising tolerance (or preference) for trading outside of traditional regulatory frameworks.
The divergence between price and reserve activity raises key structural questions. Bitcoin’s price appreciation has not coincided with a renewed inflow of reserves to US or KYC venues. In fact, reserve levels and price data are only weakly correlated: the KYC/Non-KYC ratio shows a daily correlation of just +0.05 with Bitcoin’s close price, while the US/Offshore ratio clocks in at +0.03. This lack of correlation implies that these shifts are not simply reactions to market gains but part of a deeper realignment in market behavior.
Offshore exchanges, particularly those based in jurisdictions with laxer identity verification requirements, continue to appeal to both high-frequency market makers and retail users seeking more anonymity or more lenient trading terms. The lower fees and broader token access typical of these platforms also play a role, especially as arbitrage and delta-neutral strategies return on the back of an expanding options market.
While ETF flows have been net positive year-to-date, they have not been accompanied by a sustained accumulation of reserves on US exchanges. Instead, reserves have remained flat or declined, showing that much of the ETF-related buying is routed directly through authorized participants who tap into existing liquidity. It also shows that this buying failed to create meaningful demand for spot acquisition on exchanges.
This points to a paradox: the very infrastructure built to legitimize and integrate Bitcoin into US financial markets may be accelerating the drain of custody and trading activity away from US platforms. ETFs offer easy exposure to price but decouple that exposure from the underlying coin movement that once helped anchor that liquidity in the US.
The resilience of non-KYC and offshore activity could create significant changes in the market. A rising share of trading volume outside traditional compliance rails may complicate enforcement actions, distort volume-based metrics, and challenge assumptions about the centrality of US platforms in driving price discovery.
However, the data shows that Bitcoin’s adoption as a financial instrument hasn’t tampered too much with its decentralized nature. Even amid surging institutional interest and record-breaking ETF flows, custody and liquidity preferences are drifting toward the path of least resistance. The US might remain a key entry point for fiat capital, but Bitcoin’s trading reach continues to stretch outward, beyond borders, and increasingly beyond the reach of regulators.
