Bitcoin Reserves Plummet: Impending Supply Shock Looms
1min read Bitcoin exchange reserves have plummeted to 2.5 million, signaling an impending supply shock. According to CryptoQuant data, this is the lowest reserve balance in nearly three years. The decline in reserves coincides with a surge in demand from long-term holders, despite recent price volatility.
The scarcity of Bitcoin is exacerbated by institutional investors and corporate whales acquiring the cryptocurrency at an accelerating pace. Last month, ETF issuers bought Bitcoin 20 times faster than miners could produce it, and they now hold more than Satoshi Nakamoto's original stash. However, this trend has led to a potential supply crisis for Bitcoin.
As exchange reserves dwindle, the majority of Bitcoin's supply remains in the hands of individual holders. Recent data shows that 69% of the supply is held by individuals, with ETFs experiencing their first weekly outflow of 2025. This suggests that the supply issue extends beyond ETFs and is a broader concern for the cryptocurrency.
The scarcity of Bitcoin is further compounded by the fact that the vast majority of its supply has already been mined, with only 5.7% remaining. Additionally, unknown quantities of Bitcoin are lost, making the cryptocurrency even more scarce. A slight increase in demand could trigger a fresh, bullish cycle for Bitcoin.
Despite recent price declines, demand for Bitcoin has surged among long-term holders. This week, the market witnessed a sharp spike in Permanent Holder Demand, indicating strong confidence from individual users. These holders are also selling Bitcoin less frequently, which could contribute to a supply shock.
Prominent Bitcoin advocate Michael Saylor has predicted that the supply shock will be so great that we will stop measuring Bitcoin in terms of fiat currency. Additionally, there is the consideration of a Bitcoin reserve in the US and many other countries. If such strategies are approved, state and national governments purchasing Bitcoin would further decrease the supply.
At the current level, a Bitcoin supply shock is very much imminent. However, macroeconomic factors, such as interest rates and global tariffs, will also play a critical role in determining the cryptocurrency's future trajectory.
