Bitcoin Exchange Supply Hits 8-Year Low, Boosting Price Recovery Hopes

The supply of Bitcoin (BTC) on exchanges has fallen to its lowest point in 8 years, giving rise to optimism about a potential price recovery that could push BTC to a new all-time high.

According to a report published by Santiment, a blockchain analytics firm, on March 27, Bitcoin's supply on exchanges has dropped to 7.53%, the lowest level since 2018. This indicates that more investors are transferring their Bitcoin into self-custody, thereby reducing the amount available for immediate sale.

A declining exchange supply is often viewed as a bullish sign since it indicates less short-term sell pressure and increasing confidence among holders.

Institutional demand has been one of the primary factors influencing Bitcoin's price movement. Since March 14, steady inflows into Bitcoin exchange-traded funds (ETFs) have caused BTC to increase by more than 10%. In contrast, between February 10 and March 13, ETF inflows were negative or nearly stagnant, resulting in a 17% drop in Bitcoin's price.

This trend highlights the strong correlation between institutional buying and Bitcoin price trends, with large investors having a greater impact on the market than retail speculators.

In addition to the growing institutional demand, an article published on OKX's research page on March 25 indicates that Bitcoin's market behavior is also changing. Historically, a 50% drop was considered a bear market. However, during previous cycles, drops of up to 80% have been recorded.

As Bitcoin has matured, extreme crashes caused by panic selling have become less common. Now, a 30% decline is often enough to raise bear market concerns. According to the article's insights, on-chain data suggests that instead of the prolonged declines of past cycles, Bitcoin may be experiencing a brief "mini" bear market.

An early indicator of this change was the Short-Term Holder Market Value to Realized Value ratio, which compares the current price of Bitcoin with the average price at which short-term holders purchased their coins. The metric showed bearish sentiment even before there were significant price drops on February 25.

At present, it has fallen below the 365-day moving average, a critical level that usually indicates more selling pressure. However, analysts expect the metric to improve and lead to a relief rally as the amount of Bitcoin on exchanges decreases. As of this writing, Bitcoin is trading at $87,653, approximately 19% down from its peak of $108,786.