BTC Supply Squeeze: Exchange Balances Hit Cycle Low, Signaling Reduced Selling Pressure

The total Bitcoin balance held on exchanges has reached a new low for the current cycle, falling to just 2.936 million BTC. This critical metric indicates that a significant amount of BTC is being moved to cold storage (on-chain reserves) rather than being deposited onto exchanges for potential sale. The last time exchange balances were this low was on December 17, 2022, following the FTX collapse, which triggered a centralized withdrawal action due to market distrust in CEXs.

The BTC balance on Binance specifically provides a useful short-term price signal. Since the beginning of 2024, there have been four distinct periods of rapid balance increase, each corresponding to a weakening BTC price trend. The Binance BTC balance directly correlates with the strength of immediate selling pressure in the market. The recent sustained decline in this balance, as observed currently, provides a necessary precondition for a market rebound.

A deeper look at the data reveals a compelling divergence in investor behavior. Large entities (whales holding >$1M and >$10M USD in BTC) are consistently withdrawing coins to self-custody (on-chain). Conversely, retail investors (holding <$100K USD) are net depositing BTC onto exchanges. This aligns with recent observations of major whale entities beginning to accumulate.

This pattern is highly reminiscent of the consistent outflows observed from major entities during the July-August 2021 period. In contrast, the period of January-March 2022 showed divergence, with entities >$1M withdrawing but entities >$10M depositing. Given that both on-chain and exchange selling pressure are simultaneously weakening, and demand is slowing its rate of decline, conditions for a price rebound are established. Therefore, I personally believe the current BTC rebound, initiated from the $80,000 support level, has more room to run, though its sustained momentum will depend on changes in investor sentiment and risk appetite. $BTC