Last updated on May 12th, 2026 at 08:19 pm
Bitcoin is showing early signs of a potential supply squeeze as long-term holders keep their coins dormant while exchange reserves continue to decline, according to new on-chain data.
The digital asset was trading around $69,446 at the time of analysis, with metrics indicating a widening gap between short-term investor behaviour and long-term conviction. Data shows that about 71.41% of Bitcoin’s unspent transaction outputs (UTXOs) remain in profit, while roughly 28.58% are currently at a loss.
A Bitcoin holder is typically considered a “whale” if they control at least 1,000 BTC in a single wallet or across multiple wallets. While there’s no strict rule, wallets at this level often influence market movements, and large transfers, tracked via tools like Etherscan or Blockchain.com, can signal accumulation or potential selling activity.
Short-term holders drive current selling pressure
On-chain indicators reveal that while most Bitcoin holders still maintain paper profits, short-term investors are increasingly realizing losses. The short-term holder’s spent output profit ratio (SOPR-STH) currently sits near 0.97, a level that typically indicates that coins are being sold below their purchase price.
This dynamic suggests that a segment of the market is capitulating during periods of volatility. Analysts say such behaviour is common during market corrections, when weaker hands exit positions under emotional pressure.
Meanwhile, large holders, often referred to as whales, have shown little movement in older Bitcoin holdings. The inactivity suggests that long-term investors remain confident in the asset’s broader outlook. Falling exchange reserves tighten market supply
At the same time, Bitcoin balances on centralized exchanges have been steadily declining. Year-to-date data shows reserves falling from approximately 2.99 million BTC to around 2.786 million BTC, representing a reduction of roughly 204,000 coins.
The decrease indicates that more Bitcoin is being withdrawn to long-term storage rather than kept on exchanges for trading.
Market analysts say this trend can reduce the available supply of Bitcoin on trading platforms. If demand rises while available supply remains limited, the market could experience a supply shock.
Meanwhile, Bitcoin’s selling pressure appears to be losing steam, with technical signals pointing to a potential tactical rebound even as markets digest Middle East escalation risks.
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