Key takeaways:
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Bitcoin onchain data shows a steady depletion of exchange and OTC balances, pointing to long-term accumulation and tightening supply.
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With BTC open interest near record highs and liquidity drying up, the market is tightly coiled, raising the probability of a sharp move.
Bitcoin (BTC) price has consistently risen, even as trading volumes dropped to their lowest levels since the start of the 2023–2026 cycle. Retail investor activity is subdued, and funding rates in perpetual swaps recently brushed against negative territory. It’s an unusual backdrop for a price pushing toward all-time highs.
Yet beneath the surface, onchain data points to something else: a stealth accumulation phase. While the market appears calm, the supply side is quietly drying up. With Bitcoin futures open interest hovering near record highs, the market is tightly coiled, setting the stage for a perfect storm.
BTC held on exchanges continues to fall
Even as BTC demand, in particular in the US, continues rising, the number of Bitcoin held on centralized crypto exchanges continues to decline. Since the beginning of 2025, balances have dropped another 14%, down to just 2.5 million BTC — a level last seen in August 2022.
This trend typically signals growing investor confidence and long-term holding behavior. Coins are being moved into cold storage or custodial wallets, reducing the liquid supply available for sale. Large entities often withdraw BTC after buying, reinforcing the view that accumulation is underway. With fewer coins readily available to dump, short-term sell pressure weakens.
Over-the-counter Bitcoin balances plummet
OTC (over-the-counter) desks, which facilitate large, off-exchange trades, are also showing signs of tightening supply. While these desks usually operate by matching buyers and sellers, they still rely on holding BTC reserves to enable fast and credible execution.
Currently, those reserves are at historic lows. According to CryptoQuant, OTC addresses associated with miners have seen a 19% drop in balances since January, now holding just 134,252 BTC. This data aggregates inflows from over two distinct “1-hop” addresses connected to mining pools, excluding miners themselves and centralized exchange addresses.
When exchange and OTC liquidity dry up, the available float shrinks dramatically. In a rising market, this dynamic can amplify price movements as demand chases an increasingly scarce asset.
Related: Bank of Japan pivot to QE may fuel Bitcoin rally — Arthur Hayes
Funding rates slip into negative territory
In such a tight supply environment, even modest demand can move prices sharply, especially when the market is positioned the wrong way. The funding rate situation illustrates this well.
Funding rates are periodic payments between long and short traders in perpetual futures contracts, reflecting the market’s directional bias. Positive rates mean longs are paying shorts, typically a sign of bullish sentiment. Negative rates indicate short dominance and often signal local corrections.
However, when negative funding coincides with rising BTC prices, it’s a different story. It suggests that despite short traders dominating, the spot market is absorbing sell pressure, a potential sign of strong underlying demand.
This rare pattern has appeared three times during this cycle, each followed by a significant price surge. A fourth instance may have occurred recently: between June 6–8, funding rates turned negative while BTC shot to $110,000 from $104,000.
This kind of move suggests the rally may still have legs, especially if short positions continue to get liquidated — a feedback loop that can drive prices even higher.
The Bitcoin market may seem quiet at the moment, but that may be the point. The shrinking liquid supply suggests Bitcoin isn’t rising on euphoric investor sentiment or volume, but on a growing mismatch between heavy leverage use and real spot demand. In this kind of setup, any forced liquidation or pricing dislocation in derivatives could trigger an explosive move higher.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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