Bitcoin Whales Sell 500,000 BTC, Institutions Absorb 900,000, Market Faces Supply-Demand Imbalance

In the past year, early Bitcoin holders have sold a significant amount of their holdings, totaling 500,000 BTC. This substantial sell-off has raised concerns within the cryptocurrency market, as it indicates a potential shift in sentiment among long-term investors. The sale of such a large quantity of Bitcoin could lead to increased supply in the market, which may exert downward pressure on prices.

Despite the whale sell-off, over the past year, institutions such as ETFs and corporate treasuries have collectively absorbed nearly 900,000 bitcoins. These institutions currently hold around 4.8 million bitcoins, accounting for 20% of the circulation. However, observers warn that while institutions bring stability to the cryptocurrency market, they could also become the long-awaited exit path for whales—if market sentiment reverses, retail and retirement investors may bear the risk.

The stagnation in institutional inflows further compounds the risk of a sharp decline in Bitcoin's value. Institutional investors, who have been a driving force behind the recent bull run in cryptocurrencies, have shown a lack of interest in increasing their holdings. This lack of institutional support could signal a loss of confidence in the market, potentially leading to a sell-off by other investors.

The combination of early holders selling their Bitcoin and the stagnant institutional inflows creates a precarious situation for the cryptocurrency market. The increased supply from early holders, coupled with the lack of new institutional investment, could result in a significant price correction. Investors and market participants should closely monitor these developments, as they could have a profound impact on the overall market sentiment and the value of Bitcoin.

Edward Chin, co-founder of Parataxis Capital, stated: "What we are seeing is a rotation of underlying holdings, a less-covered driving factor is that whales are using Bitcoin as collateral to participate in stock-related financing transactions to shift their risk exposure."

According to 10x Research data, over the past year, large holders have sold over 500,000 bitcoins (valued at over $50 billion at current prices), which is nearly equivalent to the net inflows since the approval of the U.S. Bitcoin ETF, and is not far from the accumulative scale of $65 billion over the past five years by the cryptocurrency holding pioneer Michael Saylor and his company (now named Strategy). Many sellers can be traced back to the early Bitcoin days when prices were much lower than the current levels. Some whales are not simply selling but are swapping tokens for stock-related assets through over-the-counter trades.

The current main risk lies in the supply-demand imbalance: if whales resume large-scale selling while institutional inflows stall, the market could experience a sharp decline. In 2018 and 2022, price drops of 74% and 64% were triggered by outflows of only 2% and 9% respectively.