Key Points
- Bitcoin’s spot exchange reserves have reached a seven-year low, hinting at a potential supply squeeze.
- Rising institutional demand for Bitcoin could further exacerbate the supply-demand imbalance.
Bitcoin (BTC) has been trading at $101,718, marking a 1.6% increase in 24 hours. The cryptocurrency maintains its dominance in the market with a market capitalization exceeding $2 trillion.
The recent gains have been accompanied by a surge in demand for BTC. This, coupled with a decreasing supply, has created a market imbalance. If these trends continue, Bitcoin could potentially face a supply squeeze that could drive its price even higher.
Bitcoin Spot Exchange Reserves at a Seven-Year Low
CryptoQuant data has revealed a decrease in Bitcoin’s supply as spot exchange reserves have reached their lowest level since mid-2018. Currently, the Bitcoin held on spot exchanges amounts to 1,055,716 BTC.
The reserves have seen a sharp decline over the past month, coinciding with Bitcoin’s rally past $100,000 to new all-time highs.
10X Research indicates that Coinbase, which holds the highest Bitcoin reserves, has seen 72,000 BTC in outflows in the past 30 days. This represents nearly 10% of the exchange’s Bitcoin balance. Binance and Kraken have also seen significant outflows.
The data for the past 30 days reveals that Bitcoin has recorded 22 days of negative netflows from spot exchanges. This suggests that traders are not eager to sell, instead opting to hold onto their Bitcoin.
Increasing Institutional Demand
The reluctance to sell is being met with increased institutional demand, as evidenced by inflows to spot Bitcoin exchange-traded funds (ETFs).
SoSoValue data shows that total inflows to spot Bitcoin ETFs in the past three weeks have exceeded $5 billion. These assets are nearing 6% of Bitcoin’s total market capitalization.
If these inflows continue, they could trigger an additional supply squeeze on Bitcoin, potentially pushing the price even higher.
Long-term Bitcoin holders are known to sell when the market hits a local top. The Binary Coin Days Destroyed (CDD) indicates that long-term holders may still be taking profits. If this cohort continues to sell, it could potentially avoid a supply squeeze if the sold coins are sufficient to absorb the buy-side pressure.