Bitcoin Reserves on Spot Exchanges Hit a 7-Year Low

Rising institutional demand amid falling supply could trigger a price squeeze

Bitcoin (BTC) was trading at $101,718, reflecting a 1.6% gain in 24 hours. As anticipated, Bitcoin remains the leading cryptocurrency with a market capitalization exceeding $2 trillion.

Despite these gains, BTC demand has surged, leading to a market imbalance due to a declining supply. If these trends continue, a potential supply squeeze could drive Bitcoin’s price higher.

Bitcoin Spot Exchange Reserves Drop

Data from CryptoQuant reveals that Bitcoin’s supply on spot exchanges has plummeted to its lowest level since mid-2018, currently at 1,055,716 BTC. This steep decline occurred as Bitcoin surged past $100,000, achieving new all-time highs.

According to 10X Research, Coinbase, the exchange with the largest Bitcoin reserves, saw 72,000 BTC in outflows over the past month, amounting to nearly 10% of its Bitcoin balance. Binance experienced 29,000 BTC withdrawn, while Kraken’s outflows exceeded 7% of its total holdings.

Netflow data over the past month indicated that Bitcoin has encountered 22 days of negative netflows from spot exchanges, signifying that traders have not been inclined to sell. This suggests that most traders are opting to hold Bitcoin despite recent gains—a sign indicating a long-term bullish sentiment.

Surge in Institutional Demand

The reluctance to sell coincides with heightened institutional demand, evidenced by substantial inflows to spot Bitcoin exchange-traded funds (ETFs).

According to SoSoValue, total ETF inflows in the past three weeks exceeded $5 billion, nearing 6% of Bitcoin’s total market cap. These inflows have been positive for the last 12 consecutive days.

Continued inflows may lead to an additional supply squeeze for Bitcoin, potentially driving prices even higher.

Insights from Binary CDD

Long-term Bitcoin holders typically sell at local market peaks. Recent reports indicate this group began selling earlier this month, causing the rally to stall.

The Binary Coin Days Destroyed (CDD) metric has remained at 1 over the last five days, suggesting long-term holders are still taking profits. Should these holders sell enough Bitcoin, it may mitigate a potential supply squeeze by absorbing buy-side pressure.