Bitcoin Supply on Exchanges Hits 7-Year Low at 14.5%

Bitcoin's supply on exchanges has reached a seven-year low, with the proportion of Bitcoin held on exchanges dropping to 14.5%. This significant decrease indicates a substantial shift in market sentiment, as long-term holders are moving their funds off exchanges. This trend suggests that investors are opting to hold their Bitcoin rather than sell, which could potentially lead to a supply shortage and drive up prices.

In June alone, Bitcoin balances on exchanges dropped from 3.09 million to 2.8 million, highlighting a near 9.4% decline in just one month. This drawdown has pushed exchange-held BTC to just 14% of the total circulating supply – the lowest level since 2017. Historically, such structural declines in liquid supply often precede aggressive supply-side imbalances, especially when paired with steady or rising demand. If demand continues to outpace available liquidity, while investors de-risk, deleverage, or rotate capital elsewhere, the cost basis per BTC could face sharp upward repricing. That’s the mechanical setup for a classic supply squeeze. With 86% of BTC now held off-exchange, the current low-volatility range could be the coiling phase before a breakout.

However, for this potential rally to ignite, one key catalyst will be essential. Tracking the source of Bitcoin’s price move is crucial. Historically, a rising spot-to-derivatives volume ratio signals growing organic demand. However, if derivatives markets begin absorbing that liquidity, it can trigger greater fakeouts. At the time of writing, the Bitcoin Trading Volume Ratio (Spot vs. Derivatives) had flipped upwards, hitting a monthly high after bottoming at 0.05 in late May – its lowest level in seven months. Notably, as the chart shows, Bitcoin printed its ATH during that low-ratio environment, underscoring that the move was heavily derivatives-driven with minimal spot participation. Consequently, once BTC breached the $111k psychological ceiling, it triggered a wave of liquidations. Over-leveraged longs were flushed out, dragging Bitcoin back below the $100k-level with little resistance.

Now, however, a key structural shift may be underway. Spot volume has been climbing, and with exchange-held supply at a 7-year low, the market might be transitioning from speculation to supply-constrained demand. If this divergence continues, Bitcoin could be on the verge of a classic supply squeeze, potentially setting the stage for a high-momentum breakout. Despite the selling by whales, the overall market sentiment remains bullish. The strategic liquidation of short positions near $104,984 triggered a rally, pushing Bitcoin's price back up to $107,000 with an intraday gain of 1.17%. This price movement highlights the volatility and potential for significant price surges in the Bitcoin market. The bullish sentiment is further supported by the fact that 98% of the Bitcoin supply is currently in profit, indicating that a majority of holders are experiencing gains.

Analysts have predicted that Bitcoin could hit $200,000 by 2025, driven by institutional interest and macroeconomic factors. The decreased supply on exchanges, coupled with the bullish sentiment and potential for price rallies, suggests that a massive price surge could be on the horizon. However, it is important to note that market volatility and potential price corrections remain risks that investors should be aware of. The bull flag pattern observed in the market also suggests continued upward momentum, further supporting the potential for a price surge.