The price of Bitcoin has recently risen as funding rates turned negative, with Bitcoin maintaining its position on exchanges and diminishing its size on over-the-counter trading desks.
On-chain Bitcoin data shows a continuous depletion of exchange balances and over-the-counter markets, indicating long-term accumulation and reduced supply.
With open interest in Bitcoin nearing record levels and liquidity draining, the market is experiencing stagnation, increasing the likelihood of a sharp move.
The price of Bitcoin (BTC) has risen
$107,342
Consistently, even as trading volumes have dropped to their lowest levels since the start of the 2023-2026 cycle. Retail investor activity is weak, and perpetual swap funding rates recently touched negative territory. It’s an unusual backdrop for a price heading towards all-time highs.
However, on-chain data suggests otherwise: a hidden accumulation phase. While the market appears calm, the supply side is quietly depleting. As open interest in Bitcoin futures approaches record levels, the market is witnessing stagnation, paving the way for a storm.
The decline in Bitcoin held on exchanges continues
Even as demand for Bitcoin continues to rise, especially in the United States, the number of Bitcoin held on centralized trading platforms continues to decline. Since the beginning of 2025, balances have dropped a further 14%, reaching only 2.5 million Bitcoin - a level not seen since August 2022.
This trend typically indicates growing investor confidence and long-term investment behavior. Coins are transferred to cold storage wallets or custodial wallets, reducing the liquidity available for sale. Large entities often withdraw Bitcoin after purchasing, reinforcing the belief that accumulation is underway. With fewer coins available for sale, short-term selling pressure weakens.
Sharp decline in off-exchange Bitcoin balances
Over-the-counter (OTC) desks, which facilitate large trades off-exchange, are also showing signs of supply contraction. While these desks typically operate by matching buyers and sellers, they still rely on holding Bitcoin reserves to enable fast and reliable execution.
Currently, these reserves have reached historic lows. According to CryptoQuant, trading addresses off-exchange linked to mining companies have seen a 19% drop in balances since January, currently holding only 134,252 Bitcoin. This data aggregates incoming flows from more than two separate 'one-point' addresses connected to mining pools, excluding the mining companies themselves and addresses of centralized trading platforms.
When liquidity drains from foreign exchange and over-the-counter markets, the available supply contracts significantly. In a bullish market, this dynamic can amplify price movements as demand for an increasingly scarce asset grows.
Funding rates are retreating into negative territory
Amid supply shortages, even modest demand can sharply move prices, especially when market conditions are unfavorable. This funding price situation is clearly illustrated.
Funding rates are periodic payments between long-term traders and short-term traders in perpetual futures, reflecting the market's bias in its direction. Positive rates mean long-term traders are paying short-term traders, which typically indicates an upward trend. Negative rates indicate short-term dominance and often signal local corrections.
However, when negative funding coincides with rising Bitcoin prices, the situation is entirely different. It indicates that despite the dominance of short-term traders, the spot market absorbs selling pressure, which is a potential sign of strong underlying demand.
This rare pattern has appeared three times during this cycle, each followed by a significant price rise. A possible fourth instance occurred recently: between June 6 and 8, funding rates turned negative while the price of Bitcoin rose from $104,000 to $110,000.
Such movements suggest that the rally may still be able to continue, especially if short positions are continuously liquidated - a feedback loop that can push prices even higher.
The Bitcoin market may seem calm at the moment, but perhaps that is the point. The shrinking supply of liquidity indicates that Bitcoin is not rising due to investor optimism or trading volume, but rather due to an increasing disparity between over-leveraged positions and real immediate demand. In such a situation, any forced liquidation or derivative price distortion could lead to a sharp price increase.
Cointelegraph
