Bitcoin Supply Drops 30% as Institutional Demand Surges

Over the past 18 months, the liquid supply of Bitcoin has decreased by 30%, primarily due to the increasing adoption by institutional investors. This trend has been driven by the rise in acquisition vehicles such as exchange-traded funds (ETFs), which have channeled new capital into Bitcoin. During this period, approximately one million BTC have been moved off exchanges, a move that is typically seen as a bullish signal, as these coins are often withdrawn for long-term holding.

According to Sygnum Bank’s latest Monthly Investment Outlook for June 2025, the shrinking liquid supply of Bitcoin is creating conditions for demand shocks and potential price surges. Institutional demand is a significant factor in this trend, with an expanding number of ETFs and corporate vehicles allowing equity and fixed-income investors to gain exposure to Bitcoin. This shift is particularly notable as many of these investors could not directly hold crypto in the past.

Geopolitical and macroeconomic uncertainty is also pushing more capital toward hard assets like Bitcoin. Factors such as fiscal instability in the US, a weakening dollar, and the selloff in Treasurys have contributed to a favorable backdrop for crypto markets. The emergence of Bitcoin reserves at the state and national level may provide another catalyst for price momentum. Three US states have already passed Bitcoin reserve legislation, with New Hampshire signing its bill into law. Texas is also likely to follow, according to Sygnum. International interest is building as well, with the Pakistani government and Reform UK expressing interest in Bitcoin reserves.

While no official BTC purchases have been made yet, such moves could spark significant price momentum once implemented. This would create fresh demand and signal institutional endorsement. Meanwhile, Bitcoin’s volatility profile is evolving, with upside volatility consistently outpacing downside volatility over the past three years. This shift reflects maturing market dynamics and deeper liquidity.

Looking at the broader crypto sector, sentiment has improved sharply. The report pointed to a “strong Bitcoin demand trend” and rising onchain activity, particularly following Ethereum’s recent Pectra upgrade, as further signs of growing market strength. Coinbase CEO Brian Armstrong has warned that Bitcoin could eventually replace the USD as the world’s reserve currency if lawmakers fail to address America’s spiraling debt. The U.S. national debt recently crossed $37 trillion, adding fresh urgency to concerns about long-term fiscal stability.