Bitcoin Exchange Reserves Plummet to Record Lows—Brace for Turbulence?

Crypto’s ultimate HODL test begins as exchange wallets hemorrhage Bitcoin. Traders are either playing 4D chess or about to learn why liquidity matters the hard way.

When reserves dry up, volatility thrives. The last time this happened, BTC swung 30% in a week—and that was before Wall Street ’discovered’ crypto (then promptly forgot about it).

Pro tip: Watch the derivatives market like a hawk. Thin spot liquidity plus leveraged bets could turn this into a speculator’s bloodbath—or another ’number go up’ masterclass. Your move, ’smart money.’

Historically, a declining supply of Bitcoin on exchanges has driven up prices, particularly when demand is high. This is seen by many analysts as an indication that the market may be about to enter a new phase, where sharper moves in either direction are fueled by limited supply.

Institutional accumulation appears to be playing a major role in the current market structure. Large holders, including wallets with between 1,000 and 10,000 BTC, have been steadily accumulating, with much of the BTC being sent to cold storage.

Strategy added 7,390 BTC in May, bringing its total holdings to 576,230 BTC, roughly 2.75% of total supply, acquired at an average price of $69,726. Other public companies, including GameStop and Japan-based Metaplanet, have also been actively adding to their holdings. 

Meanwhile, spot Bitcoin exchange-traded funds brought in $5.23 billion in inflows over the past month, according to SoSoValue data. Several governments are following suit. The UAE and Pakistan have stepped up their accumulation efforts, while U.S. lawmakers are discussing the creation of a national Bitcoin reserve.

From a technical perspective, Bitcoin appears to be in a wait-and-see phase. Momentum indicators are mixed. The relative strength index stands at 52, showing neutral momentum, while the moving average convergence divergenc has turned slightly bearish. Short-term moving averages indicate some downward pressure but the longer-term outlook remains intact.

Bitcoin is trading well above the 200-day EMA and SMA, which are both on an upward trend. The rally may continue toward $110,000 or higher if Bitcoin is able to recover its short-term moving average of around $106,000. However, a decline toward $98,000 or even $94,000 is possible if it is unable to maintain support.