Bitcoin ETFs aim to hold around 6% of Bitcoin's total market value amid growing institutional interest.
As Bitcoin (BTC) prices continue to rise, reserves on spot exchanges are declining, creating uncertainty about future price movements and possible supply constraints.
"The rapid reduction in Bitcoin supply on exchanges could lead to a significant price squeeze if demand continues to exceed supply."
With the decreasing supply, Bitcoin ETFs approaching 6% of the total BTC market value could increase the risk of a price squeeze. Here are the details of the latest market trends:
Bitcoin’s supply on spot exchanges has fallen to levels not seen since mid-2018. There are currently around 1,055,716 BTC on spot exchanges, a notable decrease during Bitcoin’s rally to over $100,000. As Bitcoin has gained value, 10X Research data highlights significant BTC outflows from major exchanges. Coinbase reported an outflow of 72,000 BTC in the past month, almost 10% of its total BTC reserves. Binance, on the other hand, saw a withdrawal of 29,000 BTC. Kraken, on the other hand, has lost over 7% of its holdings.
This suggests that market participants are not willing to sell. The observation of negative net flows over the past 22 days suggests that bullish sentiment is strong among traders and is affecting the supply reduction on exchanges. Overall, this trend suggests that Bitcoin holders are increasingly reluctant to sell, creating a long-term bullish outlook for the market.
In parallel with the decreasing supply, institutional demand for Bitcoin has also increased. This demand is reflected especially through spot Bitcoin Exchange Traded Funds (ETFs). According to key data, SoSoValue shows that inflows into these ETFs have exceeded $5 billion in the last three weeks, approaching a level that would hold approximately 6% of Bitcoin’s total market value.
These flows have continued for twelve consecutive days, showing positive net flows. If this momentum continues, the resulting demand could lead to a severe supply squeeze, further pushing Bitcoin’s price higher.
While long-term Bitcoin holders usually sell at market peaks, it has recently been observed that this group has started selling. This situation seems to have temporarily slowed down Bitcoin’s rapid rise.
The current Binary Coin Days Destroyed (CDD) metric has remained stable at 1 for the past five days, indicating that long-term holders are starting to realize their profits. These sell-offs can effectively absorb buying pressure and thus influence Bitcoin’s price movements. If the sell-off continues, long-term holders’ sell-offs could be countered by increasing institutional demand, limiting the risk of a severe supply squeeze.