Bitcoin Supply Shock Incoming? Exchanges Hold Record Low Levels as Holders Expectant

Key Takeaways

• Bitcoin exchange reserves at record low: Supply shock incoming?
• Halving event to intensify supply squeeze.
• Tether bolsters Bitcoin holdings.

Bitcoin’s exchange reserves have hit a new low this April, dropping below 2 million BTC, which is less than 10% of its total circulating supply.

This significant decrease in exchange reserves to 1.94 million BTC, accounting for approximately 9.8% of the total 19.67 million circulating Bitcoin, suggests a looming supply shock amid increasing demand, according to data  shared by CryptoQuant.

BTC Exchange Reserves Signal Potential Price Surge 

Since hitting a high  in July 2021 of 2.85 million BTC, Bitcoin’s exchange reserves have seen a consistent decline as investors increasingly choose to hold their Bitcoin for the long term rather than trade it.

This trend toward holding indicates a growing preference for viewing Bitcoin as a long-term investment. A supply shock, which occurs when the available supply of Bitcoin on exchanges drops sharply while demand increases, often results in price spikes due to a higher volume of buy orders relative to sell orders.

Significant withdrawals from exchanges, which reduce the available supply for trading, are a primary driver of such shocks, potentially leading to a rapid increase in Bitcoin’s price.

Bitcoin Halving Event Set to Amplify Supply Shock

The upcoming Bitcoin halving event, which reduces miner rewards by half every four years, is anticipated to significantly constrain the new supply of Bitcoin, thereby intensifying the effect of a supply shock.

Some reports underscored the gravity of the situation, noting that only 1.7 million Bitcoins remain on exchanges. This scarcity, coupled with the nearing halving event, is expected to trigger a pronounced supply shock, potentially catalyzing a substantial increase in Bitcoin prices.

This scenario highlights the delicate equilibrium between supply and demand in the cryptocurrency market, underscoring the strategic importance of holding and timing around significant market milestones like the Bitcoin halving.

About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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