Bitcoin supply shock brewing as Binance reserves hit lows

Despite bullish signs of scarcity, Binance’s Whale Ratio rose to 0.41, suggesting that large holders may be preparing to sell.

The available supply of Bitcoin on the world’s largest cryptocurrency exchange is rapidly shrinking.

This deepening shortage, one of the steepest readings in months, comes as data suggests large-scale investors are stockpiling the asset, setting the stage for a potential supply squeeze.

Mixed signals from large holders

October data shared by Arab Chain shows Binance Bitcoin Scarcity Index moved up throughout the month, jumping sharply in late October to surpass a reading of 9. This index is a direct measure of the reduction in the supply of Bitcoin available for immediate trading on the exchange.

In simple terms, a rising rate means that the amount of Bitcoin available on Binance for purchase is gradually falling. The analytics platform clarified that this generally points to an accumulation phase, where large investors and whales buy and withdraw BTC from Binance, effectively taking them out of the market.

“This is generally considered a long-term positive signal supporting the likelihood of a continued rise in the medium term, despite short-term price fluctuations, as buyers appear to be rushing to acquire Bitcoin in the market,” Arab Chain noted.

The assessment also noted that these supply declines are often related to positive news or sudden capital inflows. However, it also presented a fundamental caveat: scarcity alone cannot drive up prices. For a significant price increase to occur, this limited supply must be met by genuine new demand from an increasing number of buyers.

Still, this positive sign of accumulation is not the only story. Another metric tells a different story. Binance Exchange Whale Ratio 7-day average has also went up abruptly, going from around 0.33 on October 12 to approximately 0.41 between October 22 and 25.

This ratio measures large deposits in the stock market, and such a sustained rise has historically indicated that major holders are preparing to sell, creating a supply wall that can slow or reverse a price rally. It creates a complex picture in which one set of data suggests holding, while another points toward a potential sell.

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Broader market trends

The movement of coins off of exchanges is not just about whales being held in private wallets. A growing trend shows that some large BTC holders are moving their assets into spot Bitcoin ETFs like those from BlackRock.

These “in-kind” transfers allow whales to exchange 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, falling from the $111,400 level it was trading at yesterday, when the US Federal Reserve announced its second consecutive interest rate cut. While it is up 1.2% in seven days, the 30-day view shows a 3.4% decline and remains more than 12% below the new all-time high of over $126,000 it reached in early October.