Bitcoin Supply Shock Brewing as Binance Reserves Hit Lows
Bitcoin’s available supply on the world’s largest crypto exchange is shrinking quickly.
This deepening scarcity, one of the most pronounced readings in months, comes as data suggests large-scale investors are accumulating the asset, setting the stage for a potential supply squeeze.
Conflicting Signals from Large Holders
Data from October shared by Arab Chain shows that Binance’s Bitcoin Scarcity Index moved upward through the month, jumping sharply in late October to exceed a reading of 9. This index is a direct measure of the reduction in Bitcoin supply available for immediate trading on the exchange.
In simple terms, a rising index means the amount of Bitcoin sitting on Binance that is available for purchase is gradually falling. The analytics platform clarified that this typically points to an accumulation phase, where large investors and whales are buying and withdrawing BTC from Binance, effectively taking them off the market.
“This is generally considered a positive long-term signal that supports the likelihood of continued upside in the medium term, despite short-term price fluctuations, as buyers appear to be racing to acquire Bitcoin in the market,” noted Arab Chain.
The assessment also pointed out that such supply drops are often linked to positive news or sudden capital inflows. However, it also presented a critical caveat: scarcity alone cannot push prices higher. For a major price increase to occur, this limited supply must be met with genuine new demand from an increasing number of buyers.
Still, this positive accumulation signal is not the only story. Another metric tells a different tale. The 7-day average of Binance’s Exchange Whale Ratio has also climbed steeply, rising from around 0.33 on October 12 to approximately 0.41 between October 22 and 25.
This ratio measures large deposits to the exchange, and such a sustained increase has historically indicated that major holders are preparing to sell, creating a wall of supply that can slow or reverse a price rally. It creates a complex picture where one set of data suggests holding, while another points toward potential selling.
Broader Market Trends
The movement of coins off exchanges is not solely about whales holding in private wallets. A growing trend shows that some large BTC holders are shifting their assets into spot Bitcoin ETFs like those from BlackRock.
These “in-kind” transfers allow whales to swap their Bitcoin for ETF shares without creating a taxable event, a process that could act as another drain on the liquid supply available on crypto exchanges.
Meanwhile, in the market, BTC was priced at $110,232 at the time of writing, dipping from the $111,400 level it was trading at yesterday, when the U.S. Federal Reserve announced its second consecutive interest rate cut. While it’s up 1.2% over seven days, the 30-day view shows a 3.4% decline, and it remains more than 12% below the new all-time high past $126,000 it attained in early October.