Translation: Baihua Blockchain
The dynamics of Bitcoin supply are changing rapidly. Institutions are buying Bitcoin in large quantities through new investment tools, leading to a sharp decrease in circulating Bitcoin. Meanwhile, long-dormant whale wallets have suddenly become active, transferring billions worth of Bitcoin for the first time in over a decade, a move that has historically often triggered market panic. This article will analyze the current state of Bitcoin supply, explain why these 'supply crisis' signals are crucial for market sentiment and volatility, and explore how to protect your portfolio.
Institutions are frantically hoarding Bitcoin, while exchange supply sharply declines
As institutions deposit Bitcoin into cold storage, only about 11% of Bitcoin remains available for trading on exchanges. The reduction in circulating Bitcoin indicates tight supply— as shown in the image above, Bitcoin is securely locked away in boxes. This scarcity could push prices higher but also makes the market more sensitive to large sell orders.
A new wave of institutional adoption is rapidly absorbing Bitcoin supply and locking it away from the public market. Over the past year, spot Bitcoin ETFs and funds have opened the floodgates for pension funds, hedge funds, and corporations to buy Bitcoin in large quantities. For example, BlackRock's iShares Bitcoin Trust (IBIT) saw daily inflows of approximately $430 million by the end of May 2025, totaling $6.35 billion in a single month, setting a historical record. Every Bitcoin purchased by these institutions through such instruments is withdrawn from exchanges and stored in custodial cold storage, further tightening the tradable liquid supply. Other institutional products like Fidelity's Bitcoin Fund (FBTC) are also hoarding Bitcoin in large quantities, exacerbating the supply tightness.
What are the results? Bitcoin reserves on exchanges have significantly declined. On-chain data shows that as of early June 2025, Bitcoin held by exchanges dropped below 11% of the total supply, a level not seen since 2018. (In comparison, during the 2020 market, exchanges held over 17% of the Bitcoin supply, which has nearly halved now.) The reduction in available Bitcoin means that a large amount is being locked away by long-term holders and institutional custodians, leaving only 10-11% of the float available for trading. This scarcity is a double-edged sword: with fewer Bitcoins in circulation, buying pressure could rapidly push prices higher; conversely, any sudden sell orders could have a massive impact on prices due to insufficient liquidity. In short, the scarcity of Bitcoin is more apparent than ever, as 'strong hands' accumulate Bitcoin while public supply dwindles.
Sleeping whales awaken: billions in Bitcoin begin to flow
Dormant Bitcoin whales could suddenly stir up waves— as shown in the image above, whales are lurking behind Bitcoin, symbolizing how large holders influence the market. When long-inactive wallets transfer large sums (often worth billions), it raises market concerns about sell-offs. Even if these funds are not immediately sold, such movements instill fear and volatility in the market.
As institutions lock in supply, ancient Bitcoin whales have suddenly become active. In recent weeks, several wallets from the 'Satoshi era' (2010-2011) have reawakened after a decade of dormancy. For example, on July 4, 2025, two whale wallets from April 2011— which had never been active since Bitcoin's price was below $1— suddenly transferred a total of 20,000 Bitcoins (worth over $2 billion) to a new address. On-chain analysts also noted that a single whale entity controlling multiple 2011 addresses transferred tens of thousands of Bitcoins in a single day, shocking the market. These Bitcoins have seen a value increase of over 13 million percent since 2011, representing a long-term holding of billions of dollars.
Why does this matter? Because when ancient whale funds move, crypto traders pay close attention. Such massive transfers by long-term holders are extremely rare in history and are often associated with market turning points or spikes in volatility. In past market cycles, the reactivation of dormant Bitcoin wallets—especially at such scale for whales—often signaled potential sell-offs or market upheaval. The logic is that if a whale holding for over ten years suddenly decides to move funds, they may be preparing to sell off part of their assets and cash in on substantial profits. Even if these Bitcoins are not directly sent to exchanges (in the recent case, the whale transferred Bitcoins to a new personal wallet rather than immediately to trading platforms), the psychological impact is enough to unsettle traders. This injects uncertainty into the market: why now? Will these Bitcoins be dumped onto the market?
We've recently seen this fear manifest. When news broke that wallets from 14 years ago were transferring funds, Bitcoin's price dropped nearly 2% in a single day. Market participants were anxious about the scale of the transfers, with even rumors linking this activity to Bitcoin's founder Satoshi Nakamoto (though unfounded, it reflected market anxiety). Bitcoin's price fell below $108,000, showing that the market is extremely sensitive to any hint of large holders selling. In short, the movements of whales can create ripples: they remind everyone that a large amount of Bitcoin could flood the market, and just the possibility of this is enough to trigger volatility.
Market sentiment shifts and volatility risks
These intertwined dynamics—tight supply and awakened whales—create an uncertain environment. On one hand, the supply crisis brings bullish sentiment: with so few available Bitcoins, any surge in demand could trigger a rapid price increase (a typical 'supply shock' scenario). Big buyers seem confident, hoarding Bitcoin for the long term, even as circulating supply continues to shrink. 'Strong hands' are accumulating, which is usually a positive signal.
On the other hand, the market is also aware of the risks posed by concentrated holdings. When a few large holders possess substantial amounts of Bitcoin, their actions (or even rumors about their actions) can trigger severe market volatility. We have seen 'whales' holding thousands of Bitcoins—some cashing out profits after many years. Even small sell orders from these whales could have a massive impact in low liquidity situations. The recent movements from 2011 whales remind us: if whales sell, Bitcoin's lack of liquidity could lead to rapid price fluctuations. The delicate balance between bullish scarcity and fear of whale sell-offs makes the current market particularly turbulent.
For traders and investors, the conclusion is clear: be prepared for volatility. Bitcoin is still driving to new highs (boosted by optimism in the stock market and institutional adoption), but these internal supply dynamics could lead to significant price volatility in both directions. How to cope with this uncertainty? The answer is: take protective measures, such as diversifying your investments, setting stop-loss orders, or exploring financial instruments to hedge against risks, ensuring your portfolio remains robust amid market turbulence.
Master your crypto strategy
As the Bitcoin supply crisis intensifies and volatility risks from whales loom, now is the time to actively manage risk. Don't let your portfolio be caught off guard by the next whale movement or sudden market upheaval. With prudent strategies and risk management, you can seek opportunities in uncertainty or protect gains while limiting downside risk. Take action to safeguard your portfolio and prepare for future market volatility.
