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According to Cointelegraph, a recent report from the Cato Institute reveals that government pressure is the primary cause of debanking cases in the United States, rather than individual bank policies. Nicholas Anthony, an analyst at the Cato Institute, outlined in his report that debanking can occur in several forms: religious or political, operational, or government-driven. The report highlights that while media narratives often attribute account closures to political or religious discrimination, the majority of these cases are actually due to governmental influence.

Anthony elaborated that governmental debanking is the most significant issue, with many instances where government officials have intervened in the banking sector, either directly or indirectly, to dictate how banks should operate. This has particularly impacted crypto firms, which have faced account closures and denials of banking services for years. Many in the industry speculate that these actions are part of a policy-driven effort to suppress the digital assets sector, especially under the Biden administration.

The report identifies two forms of government debanking: direct, where a government uses letters or court orders to mandate account closures, and indirect, where regulations and legislation are employed to force such closures. An example of direct action is the Federal Deposit Insurance Corporation sending letters to financial institutions instructing them to cease crypto-related activities, effectively serving as termination orders without follow-up.

In December, JPMorgan CEO Jamie Dimon denied debanking customers based on religious or political affiliations during an interview, asserting that both Democrats and Republicans have pressured banks to debank individuals. This statement followed accusations from Jack Mallers, CEO of Strike, and Houston Morgan from ShapeShift, who claimed their accounts were closed without explanation.

U.S. President Donald Trump's administration has attempted to address debanking through executive orders and by appointing pro-crypto leaders to agencies like the Securities and Exchange Commission. However, Anthony argues that Congress must take further action by reforming the Bank Secrecy Act, repealing confidentiality laws, and ending reputational risk regulation. He believes these steps would reduce debanking incentives, expose its prevalence, and eliminate tools used by the government to pressure financial institutions. Anthony emphasizes the need for transparency and reform to alleviate the debanking phenomenon and protect financial institutions from undue governmental influence.

Investors have long viewed exchange reserves as a key indicator of accumulation and asset scarcity. Bitcoin held on exchanges reached a new all-time low this month.

However, as Bitcoin enters the final days of 2025, the price risks closing the year below its opening level. Why do falling exchange reserves fail to support higher prices?

How Declining Exchange Reserves Are Backfiring on Bitcoin’s Price

Under normal conditions, a sharp drop in exchange reserves signals that long-term investors are moving BTC to cold wallets. This behavior reduces selling pressure and often pushes prices higher.

CryptoQuant data shows that exchange reserves (blue line) have been declining steadily since the start of the year. The metric reached a new low near the end of 2025. Holders have accelerated BTC withdrawals since September. Approximately 2.751 million BTC are currently held on exchanges.

Bitcoin Exchange Reserve. Source: CryptoQuant.

At the same time, Bitcoin’s price fell from above $126,000 to around $86,500. Several recent analyses highlight a different side of the issue. A decrease in the number of BTC on exchanges can sometimes have a counterproductive effect.

First, the Inter-Exchange Flow Pulse (IFP) has weakened. IFP measures the movement of Bitcoin between exchanges, reflecting overall trading activity.

Bitcoin Inter-Exchange Flow Pulse (IFP). Source: CryptoQuant.

“When IFP is high, arbitrage and liquidity provision function smoothly. Order books stay thick, and price movements tend to be more stable. When IFP declines, market ‘blood flow’ weakens. Prices become more sensitive to relatively small trades,” Analyst XWIN Research Japan explained.

XWIN Research Japan added that this liquidity decline coincides with historically low exchange reserves. Scarcity no longer supports prices as expected. Instead, thinner order books make the market fragile. Even modest selling pressure can trigger price pullbacks.

Second, most exchanges have recently shown BTC accumulation, as reflected by negative BTC Flow. In contrast, Binance—the exchange with the largest liquidity share—recorded significant inflows of Bitcoin.

BTC Exchange Flow. Source: CryptoQuant.

“This matters because Binance is the largest Bitcoin liquidity hub. User and whale behavior there often has an outsized impact on short-term price action. When Bitcoin flows into Binance, even as other exchanges see outflows, overall market strength can remain muted,”analyst Crazzyblockk explained.

In other words, Binance acts as the market’s primary liquidity center. Capital concentration on this exchange weakens broader market momentum. It also offsets accumulation signals from different platforms.

Exchange reserves have dropped to record lows. However, weak liquidity and capital concentration on Binance continue to suppress Bitcoin’s upside.

In addition, a recent BeInCrypto analysis noted that Bitcoin fell as traders de-risked ahead of a potential Bank of Japan rate hike. Such a move could threaten global liquidity and the yen carry trade.

Market dynamics in late 2025 highlight a key lesson. On-chain data does not always lend itself to a single, straightforward interpretation.