Institutions are scrambling for Bitcoin: How should your investment respond to the supply crisis?

Translation: Plain Language Blockchain

The supply dynamics of Bitcoin are changing rapidly. Institutions are buying large amounts of Bitcoin through new investment tools, leading to a sharp decrease in the number of Bitcoins in circulation. At the same time, long-dormant whale wallets have suddenly become active, transferring billions of dollars worth of Bitcoin for the first time in over a decade, a move that has historically triggered market panic. This article will analyze the current state of Bitcoin supply, explain why these "supply crisis" signals are crucial for market sentiment and volatility, and discuss how to protect your portfolio.

Institutions Are Frenziedly Accumulating Bitcoin, Supply on Exchanges Dwindles

As institutions deposit Bitcoin into cold storage, only about 11% of Bitcoin remains available for trading on the exchange platform. The decrease in circulating Bitcoin means tight supply - as shown in the above image, Bitcoin is securely locked in boxes. This scarcity may drive up prices, but it also makes the market more sensitive to large sell orders.

A new wave of institutional adoption is rapidly absorbing Bitcoin supply, locking it away from the public market. Over the past year, spot Bitcoin ETFs and funds have opened the floodgates for pension funds, hedge funds, and corporations to buy Bitcoin in large amounts. For example, BlackRock's iShares Bitcoin Trust (IBIT) saw daily inflows of about $430 million at the end of May 2025, with total monthly inflows of $6.35 billion, setting a new historical record. Every Bitcoin purchased by these institutions through such tools is withdrawn from trading platforms and stored in custodial cold storage, further tightening the tradable liquid supply. Other institutional products, such as Fidelity's Bitcoin Fund (FBTC), are also accumulating Bitcoin in large quantities, intensifying supply constraints.

What’s the result? The Bitcoin reserves of trading platforms have significantly decreased. On-chain data shows that as of early June 2025, the proportion of Bitcoin held by trading platforms has dropped to below 11% of the total supply, a low not seen since 2018. (In comparison, during the market in 2020, trading platforms held over 17% of the Bitcoin supply, which has nearly been halved now.) The reduction in available Bitcoin means that a large amount of Bitcoin is locked up by long-term holders and institutional custodians, with only 10-11% of the circulating supply available for trading. This scarcity is a double-edged sword: the reduction of circulating Bitcoin could quickly increase buying pressure and push prices up; however, conversely, any sudden sell orders could have a massive impact on prices due to insufficient liquidity. In short, the scarcity of Bitcoin is more evident than ever, with "strong hands" hoarding Bitcoin and publicly available supply increasingly depleting.

Sleeping Giant Whales Awaken: Billions of Bitcoins Start to Flow

Dormant Bitcoin whales may suddenly stir the waters - as shown in the image above, the whales are lurking behind Bitcoin, symbolizing how large holders influence the market. When long-inactive wallets transfer massive amounts of funds (often worth billions), it raises concerns in the market about a potential sell-off. Even if these funds are not immediately sold, this trend can inject fear and volatility into the market.

As institutions lock in supply, ancient Bitcoin whales suddenly come alive. In the past few weeks, several wallets from the "Satoshi era" (2010-2011) have suddenly been revived after a decade of silence. For example, on July 4, 2025, two whale wallets from April 2011— which have never been active since the price of Bitcoin fell below $1—suddenly transferred a total of 20,000 Bitcoins (worth over $2 billion) to new addresses. On-chain analysts also noted that a single whale entity controlling multiple 2011 addresses transferred tens of thousands of Bitcoins in one day, shocking the market. These Bitcoins have increased in value by over 13 million% since 2011, representing billions of dollars in long-term holdings.

Why is this important? Because when ancient whale funds move, crypto traders pay close attention. Such massive transfers by long-term holders are extremely rare in history and are often associated with market turning points or spikes in volatility. In past market cycles, the reactivation of dormant Bitcoin wallets—especially of this scale of whales—has often foreshadowed potential sell-offs or market turmoil. The logic is that if a whale holding for over 10 years suddenly decides to move funds, they may be preparing to sell off some assets and cash in on massive profits. Even if these Bitcoins are not sent directly to exchanges (in a recent case, whales moved Bitcoin to new personal wallets rather than immediately to exchanges), the psychological impact is enough to unsettle traders. This injects uncertainty into the market: Why now? Will these Bitcoins be thrown onto the market?

We have recently seen a manifestation of this fear. When the news broke 14 years ago about the wallet transferring funds, the price of Bitcoin dropped nearly 2% in a single day. Market participants were anxious about the scale of the transfer, and there were even rumors linking this activity to Bitcoin's founder Satoshi Nakamoto (although unfounded, it reflects the market's anxiety). The price of Bitcoin fell below $108,000, indicating that the market is extremely sensitive to any hints of large holders selling off. In short, the movements of the whales can create waves: they remind everyone that a large amount of Bitcoin could flood the market, and just the possibility of this is enough to trigger volatility.

Market Sentiment Shift and Volatility Risk

These intertwined dynamics—supply tightness and the awakening of whales—create an uncertain environment. On one hand, the supply crisis brings bullish sentiment: with so few Bitcoins available, any surge in demand could trigger a sharp price increase (a typical "supply shock" scenario). Large buyers seem very confident, accumulating Bitcoins in the long term, even as the circulating supply continues to shrink. "Strong hands" are accumulating, which is usually a positive signal.

On the other hand, the market has also become aware of the risks brought by concentrated holdings. When a few large holders possess a significant amount of Bitcoin, their actions (or even rumors about their actions) can trigger severe market fluctuations. We have seen "whales" holding thousands of Bitcoin—some of whom have started to cash out profits after many years. Even small sell orders from these whales can have a massive impact in low liquidity conditions. The recent movements of whales in 2011 remind us: if whales sell off, the liquidity of Bitcoin is insufficient, and prices may fluctuate rapidly. The delicate balance between bullish scarcity and fear of whale sell-offs makes the current market particularly volatile.

For traders and investors, the conclusion is obvious: be prepared for volatility. Bitcoin is still pushing to new highs (driven by optimistic sentiment in the stock market and institutional adoption), but these internal supply dynamics may lead to sharp price fluctuations in both directions. How to cope with this uncertainty? The answer is: take protective measures, such as diversifying investments, setting stop-loss orders, or exploring financial instruments to hedge risks to ensure your portfolio remains robust during market turmoil.

Master Your Crypto Strategy

As the Bitcoin supply crisis intensifies and the volatility risk triggered by whales approaches, now is the time to actively manage risk. Don't let your portfolio be caught off guard by the next major whale movement or sudden market turbulence. With careful strategies and risk management, you can seek opportunities or protect gains from uncertainty while limiting downside risk. Take action to protect your portfolio and prepare for future market fluctuations.

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