Bitcoin Exchange Reserves Drop Triggers Potential Supply Shock Scenario

Bitcoin’s exchange reserves since 2013 to 2025 have historically declined before significant bull runs, including 2013, 2017, and 2021.

Prices surged from $10,000 to $69,000 by 2021 as reserves fell below 2.5M BTC. For the first time, reserves continued decreasing during the 2024 bull run, dropping to 2.35M BTC as prices hit $92.3K.

This indicated a potential supply shock as sell-side liquidity tightens. Previous cycles highlighted similar reserve drops triggering sharp price increases in Bitcoin.

Should reserves decline further, Bitcoin could experience unprecedented price movements. These trends show reserves’ pivotal role in fueling Bitcoin’s market behavior. A massive supply shock might develop.

BTC Liquidation Level Heatmap

Additionally, Bitcoin’s liquidation levels with $99K as the mid-range and acceptance above this level could lead prices toward $102.4K. The $102.4K range quarter showed significant liquidity, indicating a potential resistance zone.

Price movements reflected a gradual level-by-level approach toward higher liquidity areas. Consolidation around $99K preceded the upward push, suggesting strategic market accumulation.

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If $102.4K liquidity were absorbed, prices could extend toward range highs near $104K. The heatmap emphasized $99K’s importance as a pivotal level in recent price action.

Bitcoin’s Price Outperformance Over Crypto VC Investments

Bitcoin’s price movements against quarterly crypto VC investments from Q1 2020 to Q4 2024 showed consistently outperformance of VC funding, particularly during significant rallies.

Bitcoin surged from $10,000 in 2020 to $69,000 in Q4 2021, while VC funding peaked at $20 billion in Q1 2022.

Following the 2021 bull run, VC investments declined, reaching near $2 billion by Q3 2023, as Bitcoin consolidated around $30,000.

However, Bitcoin regained momentum in 2024, breaking $50,000 and reaching $100,000 by Q4, while VC funding remained stagnant.

This divergence emphasized reduced interest in speculative crypto projects compared to Bitcoin’s strong appeal as a distinct asset.

Investors increasingly prioritized Bitcoin as a store of value and gold alternative.

Should this trend continue, Bitcoin could further solidify its dominance over broader crypto investment sectors.

Bitcoin’s price action suggested greater market confidence, contrasting with the subdued growth in venture investments. The data signified Bitcoin’s unique positioning relative to the broader crypto market.

Bitcoin’s Decreasing Role in On-Chain Crimes

Finally, there’s shift in use of cryptocurrencies in on-chain crimes from 2020 to 2024. Bitcoin’s share of illicit transactions consistently declined over this period.

In 2020, Bitcoin accounted for the majority of criminal activity, but its dominance fell sharply by 2024.

By 2021, Ethereum and alternative cryptocurrencies began to take a larger share, while stablecoins started gaining prominence.

Stablecoins’ use in illicit activities grew steadily, reaching 63% of total illicit transaction volume by 2024. This increase reflected their liquidity and ease of use in transferring funds anonymously.

Bitcoin’s decreasing involvement in crimes suggested its growing adoption as a legitimate asset and increased regulatory scrutiny.

If these trends continue, stablecoins could dominate further, raising concerns about their role in illicit activities.

The diversification away from Bitcoin highlighted the evolving nature of criminal preferences in the crypto space.

This data portrayed Bitcoin’s diminishing association with illicit activities, reinforcing its status as a maturing asset class.