Bitcoin's Diminishing Supply Meets Climbing Profits – Where's the Demand?

Bitcoin’s price movement remains ambiguous, stuck in a narrow range between $68,000 and $70,000 for several weeks without a clear breakout in either direction. However, recent on-chain data and liquidity trends indicate that buyers may be trying to take back control, which could influence Bitcoin's short-term direction.

Key Takeaways

Active Bitcoin Supply Decline: The active supply of Bitcoin has decreased over the last month, indicating reduced transaction activity and lower volatility.
Weak Demand Signals: The net flow of Bitcoin into exchanges suggests dwindling demand, with recent purchases primarily made by whale investors.
Sell Pressure Controlled: An increase in profitable Bitcoin addresses is seen, yet many holders are choosing not to sell, maintaining a steady price.
Price Movement Limitation: Without an increase in demand, Bitcoin may struggle to break past the $70,000 mark, staying confined within its current trading range.

Bitcoin's Diminishing Supply Meets Climbing Profits – Where's the Demand?

A Decline in Active Bitcoin Supply

The active supply of Bitcoin has dropped in the past 30 days, indicating less transaction activity on the network. This decline can have several implications on the market. It implies that fewer coins are being exchanged, leading to lower volatility. Typically, reduced activity signifies that participants are cautious, especially when market confidence is fragile.

Bitcoin Active Supply
Source: Alphractal

Furthermore, recent liquidation data highlights this cautious atmosphere. Over the last few days, liquidations totaled around $132 million, which is relatively low compared to times of increased volatility. Liquidations tend to rise during abrupt price movements, so the current low figure suggests a stable market. This behavior also indicates that traders are hesitant to take on additional risks and prefer to hold their assets longer.

Signs of Weak Demand

The net flow of Bitcoin into spot exchanges, an important metric for tracking asset movements, shows diminishing demand. According to data from CoinGlass, the total net buys over the past 72 hours reached only $238.11 million, with March 1 contributing more than half that amount at $145.22 million. Even on March 2, approximately $55.62 million flowed into Bitcoin, which is not enough to drive significant price changes. While some investors are still optimistic, the overall market sentiment remains cautious.

Bitcoin Average Spot Size
Source: CryptoQuant

Notably, much of the recent buying activity has been from whales—large holders capable of influencing the market due to their substantial financial resources. Nevertheless, their interventions have not led to notable price changes, indicating that broader market engagement is lacking.

Contained Sell Pressure

One positive development is the rising number of Bitcoin addresses in profit. According to CryptoQuant’s UTXO (unspent transaction output) data, a growing portion of holders is sitting on unrealized gains. Normally, increasing profitability can lead to more selling, which could add downward pressure on the price. However, with a decrease in active addresses, it seems that many profitable holders are opting to hold onto their Bitcoin instead of selling.

At present, the number of UTXOs in profit is approximately 246 million.

Bitcoin UTXO
Source: CryptoQuant

If this upward trend persists without a corresponding rise in selling, Bitcoin could endeavor to breach the $70,000 mark. However, for a sustained price increase to occur, stronger demand in the spot market will be essential. Absent that, any breakout may be temporary, and Bitcoin could remain trapped within its established trading range.

Conclusion

Bitcoin’s current market situation reflects a struggle between diminishing supply and cautious demand. While profits are increasing for many holders, the lack of activity and engagement from the broader market presents challenges. Without a robust influx of demand, Bitcoin may continue to trade within its existing price limits.