In summary
- Bitcoin balances on exchanges have reached historic lows, reflecting a severe shortage of supply and a drop in available liquidity.
- Trump’s commitment to Bitcoin and Mining-friendly policies has helped push its price to levels near $100,000, reviving its image as a store of value.
- The reduction in Bitcoin supply on exchanges, coupled with institutional interest, could generate additional upward pressure on the price, increasing market volatility.
Bitcoin balances on Cryptocurrency exchanges have reached historic lows, as indicated by on-chain data that points to a rapid depletion of available inventory.
A recent note from 10X Research on Sunday highlighted this trend, underlined by a sharp drop in the amount of Bitcoin available to purchase.
It contrasts markedly with trends seen in late summer, when a sudden inflow temporarily replenished exchange reserves, according to the report.
However, there has been no such boost in inventory this time, compounding the supply shortage.
Bitcoin and the broader cryptocurrency market have been bolstered by favorable catalysts that point to continued growth in the year ahead, according to analysts.
President-elect Donald Trump has pledged to establish a US Bitcoin reserve while protecting cryptocurrency mining interests and crafting favorable policies for the industry.
This has helped push Bitcoin’s price to all-time highs just below $100,000 and renewed the asset’s image as a store of value in the eyes of investors.
On-chain analysis suggests that long-term holders—often seen as a stabilizing force in the market—firmly hold their positions, limiting the flow of Bitcoin to exchanges and reducing liquidity.
The attached chart from 10X Research, using data from Glassnode, reveals a clear divergence between the available supply of Bitcoin on exchanges and its price.
Decrease in the supply of Bitcoin on exchanges. Image: 10X Research
The blue line, which represents the 30-day moving average of Bitcoin available for purchase, has collapsed.
Meanwhile, the price of Bitcoin, plotted on a logarithmic scale, rose sharply in the second half of 2024, recently approaching the $100,000 threshold.
Currently, only three major exchanges—Bitfinex, Binance, and Coinbase—report enough Bitcoin reserves to meet buyer demand, 10X notes.
Smaller exchanges face increasing challenges in maintaining liquidity, which could lead to greater price volatility.
The reduction in supply coincides with broader macroeconomic trends, including institutional interest in Bitcoin-based financial products such as spot ETFs.
The reduction in inventory on exchanges could further drive upward pressure on prices as demand grows from both retail and institutional investors, Decrypt was previously informed.
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