Bitcoin exchange supply has fallen to its lowest level in eight years, igniting optimism for a potential price rebound towards a new all-time high for BTC.
Recent data reveals that Bitcoin’s (BTC) supply on exchanges has plummeted to 7.53%, marking a significant decline since 2018. This trend indicates that more investors are opting for self-custody of their Bitcoin, resulting in a reduced amount available for immediate liquidation.
A decreasing supply on exchanges typically signals diminished short-term selling pressure and increased confidence among investors, making it a bullish indicator for the cryptocurrency market.
Institutional demand is a critical factor influencing Bitcoin’s price movements. Since March 14, Bitcoin exchange-traded funds (ETFs) have experienced consistent inflows, contributing to a more than 10% increase in BTC’s value. This stands in contrast to the period between February 10 and March 13, when ETF inflows were stagnant or negative, causing Bitcoin to decline by 17%.
The correlation between institutional buying and Bitcoin price trends highlights the significant impact that large investors exert over the market, often overshadowing retail speculators.
Moreover, recent insights indicate a shift in Bitcoin market behavior. Historically, a 50% price drop was seen as indicative of a bear market, with prior cycles recording losses up to 80%. However, as Bitcoin matures, such extreme downturns prompted by panic selling are becoming less frequent. Currently, a 30% decline triggers concerns about a bear market. According to on-chain data, Bitcoin may be experiencing a brief “mini” bear market, rather than the prolonged downturns of previous cycles.
A key indicator of this transition is the Short-Term Holder Market Value to Realized Value ratio, which compares Bitcoin’s current price to the average price at which short-term holders bought their assets. This metric indicated bearish sentiment even before substantial price drops occurred on February 25.
Currently, the ratio has dipped below the 365-day moving average, a crucial threshold often associated with heightened selling pressure. Nevertheless, analysts foresee potential recovery and a relief rally as the volume of Bitcoin on exchanges continues to decrease. At present, Bitcoin is trading at $87,653, approximately 19% below its peak of $108,786.
