In the cryptocurrency market, Bitcoin (BTC) might soon start recovering thanks to a decline in its hot supply.
Bitcoin's Hot Supply Decline
According to Glassnode, Bitcoin's hot supply, a metric tracking BTC aged ≤1 week, recorded a 50% decline over three months. This contraction reduced the proportion of coins aged a week or less from 5.9% to 2.8% of Bitcoin's circulating supply.
Bullish or Bearish Signal?
A decline in hot supply can be seen as either a positive or negative factor. In a bullish scenario, fewer active trades and movements could indicate increased holding behavior and reduced volatility, leading to market stability and potential medium-term rallies. Under stable or high-demand conditions, low hot supply can trigger a supply shock, exerting positive pressure on Bitcoin’s price.
Declining Bitcoin Demand
Glassnode reports lower demand for Bitcoin compared to three to four months ago. Bitcoin inflows to exchanges have fallen by 54%, aligning with declining investor sentiment and capital flows. However, Bitcoin ETFs have recorded three days of inflows this week, hinting at a recovering demand.
The decline in Bitcoin's hot supply could turn out to be a positive signal for the market. It may contribute to stability and price appreciation if demand starts to pick up. It's essential to monitor further developments in the market.
