Key Takeaways:
Bitcoin and Ethereum exchange supplies have dropped to their lowest levels in eight and 11 years, respectively, pointing to a structural shift toward long-term holding.
Bitcoin exchange supply dropped to its lowest since 2017 and Ethereum supply to its lowest since 2015, Santiment data shows, as holders withdrew coins from centralized platforms.
The persistent drawdown reflects a shift toward long-term holding and institutional accumulation, according to Santiment. Lower exchange balances reduce sell-side liquidity, which could increase upward price pressure if demand remains steady.
The supply squeeze extends beyond the two largest cryptocurrencies. XRP's Binance Scarcity Index climbed to 0.77, its highest reading in more than two years, CryptoQuant data shows. Binance XRP reserves have dropped roughly 20% since November 2024, from 3.27 billion coins to about 2.6 billion. The drawdown accelerated from May, when reserves stood near 2.8 billion.
Lower exchange supplies reduce immediate selling pressure, but demand must hold for prices to benefit. Spot Bitcoin ETFs registered $265 million in inflows on Monday after posting $4.51 billion in net outflows in June, their worst month on record, according to Farside Investors data. Market observers will watch whether institutional flows resume, as continued demand could push prices higher.
Other indicators also suggest the market is at a turning point. More than half of Bitcoin's circulating supply was held at a loss, a condition that preceded market bottoms in prior cycles, according to K33 Research. Previous bear markets bottomed within weeks of that signal — 31 days in 2017, 23 days in 2018 and 13 days in 2022. The 2014 cycle was an outlier, with Bitcoin bottoming 101 days after the signal and falling 25% over the following year.
Bitcoin's risk appetite index fell to minus 1.27 on July 3 before bouncing higher, Block Scholes data shows. The eight prior instances of such a move preceded a median spot return of 12% over the following 100 days, the firm said.
However, large sellers could make this cycle behave differently. Strategy, formerly MicroStrategy, sold 3,588 Bitcoin for $216 million to fund dividends and debt payments, marking a shift from its long-standing buy-and-hold approach. CEO Phong Le described the move as an evolution "from one-way capital issuance to active capital management."
This article is for informational purposes only and does not constitute investment advice.
