- Bitcoin reserves on spot exchanges have fallen to their lowest level since 2017
- Rising institutional demand amid falling supply could trigger a price squeeze
Bitcoin (BTC)At the time of writing, it was trading at $101,718 on the charts, having gained 1.6% in 24 hours. As expected, King Coin remains the most dominant cryptocurrency on the market, with a market cap of >$2 trillion.
In addition to these recent gains, demand for BTC has also skyrocketed. This has led to an imbalance in the market due to declining supply. If these trends continue, Bitcoin could face a potential supply crunch, which could push the price higher.
Bitcoin spot exchange reserves hit a seven-year low
Data from CryptoQuant highlighted the drop in Bitcoin supply after spot exchange reserves fell to their lowest level since mid-2018. In fact, Bitcoin held on spot exchanges now stands at 1,055,716 BTC.
Source: CryptoQuant
These reserves have seen a sharp decline over the past month, amid Bitcoin’s rally past $100,000 to new all-time highs.
According to 10X Research, Coinbase, which has the highest Bitcoin reserves, has included 72,000 BTC in outflows in the last 30 days. These outflows comprised almost 10% of the exchange’s Bitcoin balance.
Within the same period, 29,000 BTC was also withdrawn from Binance, while Kraken’s outflows represented more than 7% of its total Bitcoin holdings.
The net flow data for the past 30 days also showed that Bitcoin has recorded 22 days of negative net flows from spot exchanges. This is further evidence of a scenario where traders are not keen on selling.
Source: CryptoQuant
Furthermore, this data suggested that most traders are choosing to hold Bitcoin despite its recent gains – a sign of their long-term bullish outlook.
Rising institutional demand
The reluctance to sell was met with a spike in institutional demand, as evidenced by inflows into Bitcoin Exchange Traded Funds (ETFs).
According to SoSoValue Data shows that total inflows into Bitcoin ETFs have surpassed $5 billion in the past three weeks. These assets are inching closer to owning 6% of Bitcoin’s total market capitalization.
Inflows into these ETFs have also been positive over the past twelve consecutive days.
If these inflows continue, it could lead to additional supply pressure on Bitcoin, pushing the price higher.
Binary CDD shows….
Long-term Bitcoin holders have been known to sell when the market reaches a local top. As AMBCrypto reported, this cohort started selling Bitcoin earlier this month, bringing the rally to a halt.
The Binary Coin Days Destroyed (CDD) has been at 1 for the past five days. This implied that long-term holders may still be taking profits.
Source: CryptoQuant
If this cohort sells, it could lead to Bitcoin avoiding a potential supply squeeze if the coins sold are enough to offset buy-side pressure.