Bitcoin and Ethereum Supply Shock Is No Longer Coming — It’s Already Here

Key Takeaways

• Bitcoin and Ethereum balances on exchanges are at historic lows.
• ETH supply has dropped due to staking; BTC’s decline is driven by institutional accumulation.
• Low exchange reserves are typically seen as bullish, reducing sell-side pressure.

The long-anticipated supply shock in crypto isn’t on the horizon—it’s already here.

Bitcoin (BTC) and Ethereum (ETH), the market’s two largest assets, are vanishing from centralized exchanges at a pace not seen in years.

ETH Supply Hits All-Time Low, BTC Drops to 7-Year Low

According to on-chain data, Ethereum’s exchange balance has slipped below 4.9%—an all-time low—while Bitcoin’s sits around 7.1%, the lowest level since November 2018.

These drops reflect a clear behavioral shift: holders are moving coins off exchanges and into cold wallets or staking protocols, signaling stronger conviction and longer-term horizons.

This trend isn’t just academic. In previous bull cycles, declining exchange supply has correlated with reduced sell pressure and increased price responsiveness.

When coins dry up on the open market, demand has less resistance to push prices higher.

For Ethereum, the shift is mostly tied to staking.

More ETH is now locked in validator nodes, which not only strengthens the network but also shrinks available liquidity, another driver of volatility and, potentially, upward momentum.

On the Bitcoin side, the story is largely institutional.

OTC Desks Run Dry, Traders Exit CEXes

Fueling this new phase of the supply shock is the surge in market optimism during May.

Bitcoin and Ethereum have bounced more than 30% from their April lows, kicking off a fresh wave of demand.

A big part of that demand is coming from ETFs. Spot Bitcoin and Ethereum funds have absorbed billions in inflows in recent weeks, pushing institutions to buy aggressively—and often off-exchange.

According to CryptoQuant , exchange reserves have dropped 21% in 2025 alone.

More than 600,000 BTC were withdrawn this year, with 40% of that movement occurring after the U.S. elections.

By May 2025, exchange-held BTC sat around 2.4 million—down nearly a million coins in just two years.

One standout signal: a massive 110,000 BTC outflow in a single month earlier this year.

That kind of movement typically accompanies strong bullish sentiment from long-term holders.