TLDR
- Bitcoin exchange balances have dropped to just 14% of total supply, the lowest level since 2017
- Spot Bitcoin ETFs recorded $9.91 billion in inflows since May 1, driven by institutional demand
- Exchange balances have declined for 98 consecutive days, marking the longest drawdown since 2020
- Political pressure on the Federal Reserve from President Trump may boost Bitcoin demand
- Spot trading volume is rising while derivatives activity decreases, indicating organic demand growth
Bitcoin’s supply dynamics are shifting in ways that could signal a major price move ahead. Exchange-held Bitcoin has dropped to its lowest level in seven years, while institutional demand through ETFs continues to surge.
The numbers paint a clear picture of tightening supply. Bitcoin balances on exchanges have fallen to just 14% of total circulating supply. This marks the lowest level since 2017, when Bitcoin was trading at much lower prices.
In June alone, exchange balances dropped from 3.09 million to 2.8 million Bitcoin. This represents a 9.4% decline in just one month. The trend has been consistent, with balances falling for 98 consecutive days.
This extended drawdown period matches the longest streak since 2020. That previous drawdown preceded Bitcoin’s major bull market breakout to new all-time highs.
Institutional Demand Drives ETF Inflows
Spot Bitcoin ETFs have seen massive inflows recently. Since May 1, these funds have recorded $9.91 billion in new money. This represents about 20% of their total inflows since launching in January 2024.
The inflows experienced only their first net outflow day on Wednesday after 15 consecutive days of positive flows. Analysts view this institutional demand as driven more by macro concerns than short-term momentum.
Political pressure on the Federal Reserve may be fueling some of this demand. President Trump has criticized Fed Chair Jerome Powell, saying his termination “can’t come fast enough.”
This rhetoric may have triggered what analysts call the third wave of Bitcoin ETF accumulation. The political uncertainty around Fed leadership could benefit Bitcoin if Trump pushes for a more dovish monetary policy.
Supply Squeeze Mechanics Taking Shape
The combination of declining exchange supply and rising institutional demand creates conditions for a potential supply squeeze. With 86% of Bitcoin now held off exchanges, available liquidity has become increasingly scarce.
Analysts point to this as the mechanical setup for a classic supply squeeze. When demand continues to outpace available liquidity, the cost basis per Bitcoin could face sharp upward repricing.
Trading patterns are also shifting in Bitcoin’s favor. The spot-to-derivatives volume ratio has flipped upward, hitting a monthly high after bottoming at 0.05 in late May.
Technical Targets and Price Action
Based on current market conditions, some analysts see Bitcoin potentially reaching $116,000 by the end of July. This would represent a 6.45% jump from current levels around $109,000.
The target also sits 3.60% above Bitcoin’s current all-time high of $111,970. Bitcoin is currently testing the top of its consolidation range, with momentum building from multiple macro catalysts.
Recent price action shows Bitcoin recovering from liquidation events near $104,984. Bulls triggered $40 million in short liquidations, pushing the price back toward $107,000 with an intraday rally of 1.17%.
The shift from derivatives-driven moves to spot-based demand could provide more sustainable price momentum. When Bitcoin hit its all-time high, the move was heavily derivatives-driven with minimal spot participation.
Now spot volume has been climbing while exchange-held supply remains at multi-year lows. This transition from speculation to supply-constrained demand could set the stage for a high-momentum breakout.
Current data shows Bitcoin up 0.69% over the past seven days, with the supply squeeze dynamics continuing to build momentum.
