INSUBCONTINENT EXCLUSIVE:
Key takeaways:Bitcoin onchain data shows a steady depletion of exchange and OTC balances, pointing to long-term accumulation and tightening
supply.With BTC open interest near record highs and liquidity drying up, the market is tightly coiled, raising the probability of a sharp
Retail investor activity is subdued, and funding rates in perpetual swaps recently brushed against negative territory
While the market appears calm, the supply side is quietly drying up
With Bitcoin futures open interest hovering near record highs, the market is tightly coiled, setting the stage for a perfect storm.BTC held
on exchanges continues to fallEven as BTC demand, in particular in the US, continues rising, the number of Bitcoin held on centralized
crypto exchanges continues to decline
typically signals growing investor confidence and long-term holding behavior
Coins are being moved into cold storage or custodial wallets, reducing the liquid supply available for sale
Large entities often withdraw BTC after buying, reinforcing the view that accumulation is underway
With fewer coins readily available to dump, short-term sell pressure weakens.BTC on exchange reserve
Source: CryptoQuantOver-the-counter Bitcoin balances plummetOTC (over-the-counter) desks, which facilitate large, off-exchange trades, are
also showing signs of tightening supply
While these desks usually operate by matching buyers and sellers, they still rely on holding BTC reserves to enable fast and credible
execution.Currently, those reserves are at historic lows
According to CryptoQuant, OTC addresses associated with miners have seen a 19% drop in balances since January, now holding just 134,252 BTC
exchange addresses.BTC: OTC address cohort balance
Source: CryptoQuantWhen exchange and OTC liquidity dry up, the available float shrinks dramatically
In a rising market, this dynamic can amplify price movements as demand chases an increasingly scarce asset.Related: Bank of Japan pivot to
move prices sharply, especially when the market is positioned the wrong way
The funding rate situation illustrates this well.Funding rates are periodic payments between long and short traders in perpetual futures
Positive rates mean longs are paying shorts, typically a sign of bullish sentiment
Negative rates indicate short dominance and often signal local corrections.However, when negative funding coincides with rising BTC prices,
It suggests that despite short traders dominating, the spot market is absorbing sell pressure, a potential sign of strong underlying
demand.This rare pattern has appeared three times during this cycle, each followed by a significant price surge
drive prices even higher.BTC funding rates
Source: Marie Poteriaieva, CryptoQuantThe Bitcoin market may seem quiet at the moment, but that may be the point
leverage use and real spot demand
In this kind of setup, any forced liquidation or pricing dislocation in derivatives could trigger an explosive move higher.This article does
not contain investment advice or recommendations
Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
