Bitcoin reserves drop to 2.35M as hedge funds buy

Bitcoin (CRYPTO:BTC) exchange reserves have reached a near seven-year low, with current levels at 2.35 million BTC as of January 13, 2025.

This decline has been linked to increased buying activity from institutional investors, particularly hedge funds looking to capitalise on discounted prices.

André Dragosch, head of research at Bitwise, noted that the "beta coefficient of global hedge fund performance relative to Bitcoin has increased from recent cycle lows," indicating a rise in market exposure to Bitcoin and other crypto assets.

The shrinking reserves may signal an impending price rally due to a potential "supply shock."

This phenomenon occurs when strong buyer demand intersects with a limited supply of Bitcoin, often resulting in upward price movement.

Despite this potential for price appreciation, analysts have pointed out that Bitcoin currently lacks the trading volume necessary to break through the significant $100,000 resistance level.

"Market sentiment appears to be stabilising, with reduced selling pressure suggesting potential consolidation or an upward trajectory if the resistance is overcome," stated Ryan Lee, chief analyst at Bitget Research.

However, he also cautioned that low trading volume on the daily timeframe indicates a lack of decisive momentum needed to surpass current resistance or support levels.

In December 2024, U.S. spot Bitcoin exchange-traded funds (ETFs) purchased nearly three times the amount of Bitcoin mined during that month, coinciding with Bitcoin reaching an all-time high of $108,300 on December 17.

The overall cryptocurrency market is experiencing reduced trading activity as well, with trading volumes dropping to levels not seen since before the U.S. elections.

Market intelligence platform Santiment reported that this "trading paralysis" could increase the likelihood of rebounds in the future.

Despite these challenges, some analysts remain optimistic about Bitcoin's long-term trajectory, predicting a potential cycle top above $150,000 by late 2025 due to anticipated increases in global money supply.

At the time of reporting, the Bitcoin (BTC) price was $94,929.22.