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On October 20, 2020, the amount of Bitcoin (BTC) held at major exchanges fell below 2.5 million BTC for the first time in two years.

Nexo co-founder Antoni Trenchev opined to Cointelegraph that this trend is driven by the world finally realizing that only Bitcoin offers sound monetary policy:

He also noted that the community is resorting more to self-custody solutions, including platforms like Nexo, where they can tax-efficiently borrow against their assets rather than selling them." Cointelegraph noted yesterday thatthe Bitcoin supply is currently diffused more than ever.

Alex Mashinsky, co-founder of the Celsius crypto lending platform, told Cointelegraph that the exodus will likely continue unless exchanges begin offering better terms to their customers:

From the chart above, we can see that this swing has not impacted all exchanges equally. While balances at BitMEX and Bitfinex were decimated, decreasing by more than half, Binance has continued to accumulate additional funds. Coinbases coffers have remained mostly unchanged as well.

The growth of DeFi may have also contributed to this trend. The amount of Bitcoin locked on Ethereum through wBTC and renBTC presently exceeds 130,000. Just a few months ago, these numbers were negligible. Another likely culprit is institutional adoption. Aside from the continuous growth of Grayscales Bitcoin Trust Fund, publicly-traded companies like MicroStrategy and Square began adding crypto assets to their treasuries.

It seems that there is either a general trend towards users withdrawing Bitcoin from custodial exchanges, or perhaps a few major exchanges are simply losing the trust of their customers. The latter may be a reasonable conclusion, as a mere three platforms (BitMEX, Huobi, and Bitfinex) were responsible for the bulk of the trend their balances decreased by 390,000 BTC, making them accountable for almost 80% of the total decline.

The rest is here:
For the first time since 2018 Bitcoin balances on exchanges fell below 2.5M - Cointelegraph