How high can Bitcoin rally as its supply hits an 8 year low? Assessing…

Key Takeaways

What does Bitcoin supply shift tell us?

Does this look like a market top?

Accumulation is steady, and selling pressure has eased, suggesting BTC isn’t overstretched and a bottom may be forming.

Over the six weeks since Bitcoin last set a new ATH, the market has gone through a clear wave of capitulation. One of the standout signals was the STH MVRV, which dropped from 1.09 all the way down to 0.78.

In simple terms, recent buyers (holding for <155 days) were sitting on roughly 15% unrealized losses on average, showing just how underwater short-term sentiment had become.

More importantly, this move lined up with Bitcoin’s [BTC] 37% retracement from $126k to $80k. The collapse in STH MVRV to levels last seen in 2022 made it clear that weak hands had fully capitulated into the decline.

Source: Glassnode

Macro stress continues to dominate sentiment

Fast forward six weeks, and macro volatility remained very much in play. 

Scrutiny around Bitcoin DATs, uncertainty over rate cuts, Supply in Profit sitting at 65% (back to 2023 levels) and a Fear and Greed Index reading of 12 all reinforced the “extreme fear” gripping the market.

In essence, further capitulation can’t be ruled out, especially when STH MVRV at 0.85 showed that recent buyers were still deeply underwater.

That kind of setup keeps the market vulnerable to additional downside pressure.

On the other hand, Bitcoin’s 3% rebound in under 48 hours suggested that bulls were starting to ease some of that stress. A number of analysts now argue that the worst of the selling may already be behind us.

The question is: Is this the early stage of the classic handoff from weak holders to stronger ones?

Bitcoin supply points to strength beneath the surface

45 days later, it’s worth taking a look at Bitcoin’s supply dynamics.

Over 630k BTC moved off exchanges overnight, and whale wallets holding 10k+ BTC just hit a five-month high. When smart money is stacking while retail is panicking, that’s usually a clear signal of where real conviction sits.

On top of that, Bitcoin’s Exchange Reserves have dropped to an eight-year low at 1.8 million BTC.

That’s 560k BTC pulled from exchanges in just the last three days, and it lines up with BTC’s 3% rebound off the $86k level.

Source: CryptoQuant

In short, this isn’t what a Bitcoin top looks like.

Sure, more capitulation is still possible given the volatility, but the steady accumulation suggested BTC was not overstretched. It also adds weight to the argument that the worst of the selling pressure may already be behind us.

Hence, this bid looks like the early stages of a supply transfer.

Weak hands shake out while stronger holders quietly step in. If that trend sticks, it usually doesn’t take long before the market starts carving out a bottom.