- Bitcoin’s exchange-held supply just hit a 7-year low, while the spot volume kept rising
- Is BTC gearing up for a breakout few are positioned for?
Despite its choppy price action, bullish conviction in Bitcoin [BTC] remains clear. In fact, recent market moves may be starting to back it up.
Strategically, bulls triggered a $40 million short liquidation near $104,984, pushing BTC back up to $107k with an intraday rally of 1.17% at press time.
However, this liquidity sweep wasn’t just a fluke. In June alone, Bitcoin balances on exchanges dropped from 3.09 million to 2.8 million, highlighting a near 9.4% decline in just one month.
In fact, this drawdown has pushed exchange-held BTC to just 14% of the total circulating supply – The lowest level since 2017.
Source: Glassnode
Historically, such structural declines in liquid supply often precede aggressive supply-side imbalances, especially when paired with steady or rising demand.
Put simply, if demand (reflected in declining exchange balances) continues to outpace available liquidity, while investors de-risk, deleverage, or rotate capital elsewhere, the cost basis per BTC could face sharp upward repricing.
That’s the mechanical setup for a classic supply squeeze. With 86% of BTC now held off-exchange, the current low-volatility range could be the coiling phase before a breakout.
However, according to AMBCrypto, for this potential rally to ignite, one key catalyst will be essential.
Tracking the source of Bitcoin’s price move
Before interpreting the current metrics as outright bullish, it’s essential to assess where liquidity is actually flowing.
Historically, a rising spot-to-derivatives volume ratio signals growing organic demand. However, if derivatives markets begin absorbing that liquidity, it can trigger greater fakeouts.
At the time of writing, CryptoQuant’s Bitcoin Trading Volume Ratio (Spot vs. Derivatives) had flipped upwards, hitting a monthly high after bottoming at 0.05 in late May – Its lowest level in seven months.
Notably, as the chart below shows, Bitcoin printed its ATH during that low-ratio environment, underscoring that the move was heavily derivatives-driven with minimal spot participation.
Source: CryptoQuant
Consequently, once BTC breached the $111k psychological ceiling, it triggered a wave of liquidations. Over-leveraged longs were flushed out, dragging Bitcoin back below the $100k-level with little resistance.
Now, however, a key structural shift may be underway.
Spot volume has been climbing, and with exchange-held supply at a 7-year low, the market might be be transitioning from speculation to supply-constrained demand.
If this divergence continues, Bitcoin could be on the verge of a classic supply squeeze, potentially setting the stage for a high-momentum breakout.
