Understanding the number of Bitcoins available for sale provides critical insight into market dynamics, supply shocks, and potential price movements. Recent on-chain analysis reveals fascinating shifts in regional accumulation patterns and investor behavior, painting a complex picture of the current crypto landscape.
Regional Market Sentiment Shifts
The cryptocurrency market has experienced significant regional divergence in investor sentiment and behavior over the past year. While Asian markets have shown strong accumulation trends, U.S. demand appeared relatively weaker for much of 2023—until recently.
A notable shift occurred when Blackrock, the world's largest asset manager, led a wave of spot Bitcoin ETF applications. This institutional interest triggered a powerful price rally, pushing Bitcoin from $25,000 to over $31,000, marking a new yearly high.
This rally unfolded in distinct regional waves:
- U.S. traders led the initial surge
- European traders followed
- Asian traders joined last
We can quantify these regional differences by analyzing net Bitcoin flows through major exchanges. By categorizing exchanges based on their operational headquarters, we gain valuable insights into geographical market sentiment.
U.S.-based exchanges: Coinbase, Kraken, Gemini
Asia-based exchanges: Binance, OKX, Huobi
During the early stages of the 2020-2021 bull market, the collapses of LUNA and FTX triggered significant Bitcoin accumulation and self-custody trends. Most exchanges experienced daily net outflows of 5,000 to 10,000 BTC.
However, Binance occasionally demonstrated opposite behavior, with substantial Bitcoin inflows accompanying market sell-offs and downward trends. This suggests investors were moving their holdings from perceived riskier exchanges (like FTX) to the world's largest trading platform.
Monthly cumulative net flows reveal even more interesting patterns. During the bottom discovery phase between November 2022 and January 2023, both regions showed net outflows (accumulation). However, following LUNA's collapse and throughout most of 2023, offshore exchanges saw net inflows while onshore exchanges maintained net outflows, indicating U.S. investors were primarily accumulating or remaining neutral during this period.
This metric helps observers monitor regional market sentiment changes, especially their reactions to external factors. For example, after the SEC announced lawsuits against Binance US and Coinbase, both regions responded with significant exchange outflows alongside price adjustments.
Currently, offshore exchanges show net outflows of 37,700 BTC monthly, while onshore exchange buying pressure has declined to negative 3,200 BTC monthly.
Measuring Demand Through Active Supply
Recent analysis highlights a significant wealth transfer from high-time-preference investors toward long-term holders. This increasing illiquidity pattern represents a crucial component of all previous Bitcoin bull markets. While "supply shocks" can positively impact price discovery, trend sustainability ultimately depends on new demand entering the market.
To track demand expansion (or contraction), we've developed a framework that measures supply dynamics as a proxy for demand, specifically focusing on highly active supply.
Capital flow quantification can be achieved by measuring changes in the highly active portion of circulating supply.
When new demand enters the market, existing investors typically respond by trading and selling their Bitcoin at higher prices. Thus, the selling of older Bitcoin requires expansion of the young supply region.
Understanding "Hot Supply"
We define "young supply" as all Bitcoin that moved within the past 155 days (held by short-term holders), which has a high probability of being used in the near term. We can further isolate the most liquid and active subset of young supply, which we call "hot supply."
Hot supply represents a subset of young supply with a velocity of 1 or higher. A velocity exceeding 1 means that, on average, each Bitcoin in this region moves at least once per day.
Using the formula below, we can calculate the velocity for any arbitrary subset of Bitcoin i:
Velocity_i = Daily Volume_i / Supply_i
The chart below shows the all-time average velocity for:
- Perpetual futures markets (velocity = volume divided by open interest)
- Spot market (<1-week coins) (velocity = on-chain volume divided by <1-week supply)
- Spot market (<1-month coins) (velocity = on-chain volume divided by <1-month supply)
Both perpetual futures markets and markets with supply under one week show velocities exceeding 1. If we consider the next age band (1-month Bitcoin), velocity drops below 1, reinforcing that older Bitcoin has lower probability of being sold.
To better understand the scale of this "hot supply," we can compare this portion against perpetual open interest, total circulating supply, and potentially lost supply. Notably, throughout Bitcoin's history, price discovery has primarily been driven by a relatively small portion of the total circulating supply.
Hot supply has a median value of 670,000 BTC and a maximum of 2.2 million BTC, representing between 3.5% and 11.3% of total supply. This is similar to the estimated 1.46 million BTC (approximately 7.2% of total supply) that has never moved since Bitcoin began trading in July 2010—presumably lost coins.
The scale of perpetual futures open interest (472,000 BTC) and hot supply (511,000 BTC) is also remarkably similar. This suggests approximately 983,000 BTC (worth about $29.5 billion) is currently available for sale, with slightly less than half being spot Bitcoin.
We can also demonstrate the correlation between price action and changes in these hot supply and perpetual open interest components. The chart below shows net position changes for these segments over the past 90 days, allowing us to identify how capital flows into and out of markets, plus the scale of these movements.
During previous bull markets and severe capitulation events, typically 250,000 to 500,000 BTC of capital injection occurred. However, during sustained bear markets, similar-sized capital amounts were accumulated and spent outside the market for considerable time, exiting this "hot supply" sequence (purchased by holders and stored long-term).
The chart below reveals how expansions of hot supply impact price movements. Over the past five years, we've observed seven major capital inflow waves, ranging from 400,000 to 900,000 BTC per quarter. These correlated with market moves between 26% and 154%.
From this chart, we can also compare the potential impact of liquidations from major supply sources, such as Mt. Gox funds (137,000 BTC) and U.S. government seizures (204,000 BTC). We can see that equivalent to one quarter of demand inflow could potentially absorb the full distribution from both these sources.
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Reactions to On-Chain Cost Basis
In our previous analysis of short-term holder behavior during cycle pivot points, we identified the significance of the relationship between price and the short-term holder cost basis. Throughout 2023, price has intersected with the short-term holder cost basis twice, providing strong market support.
Last week, the weekly rate of change for both long-term and short-term holder cost bases declined to zero, reflecting price stability around $26,000. This suggests investor psychology has shifted from the 2022 bear market mentality toward viewing break-even levels as opportunities to establish positions rather than exit liquidity.
We can also observe the short-term holder MVRV ratio showing strong reactions to the break-even point at MVRV = 1.
The ratio currently stands at 1.12, indicating that on average, short-term holders are enjoying 12% profits. When this metric exceeds between 1.2 (approximately $33,200) and 1.4 (approximately $38,700), correction risk typically increases as investors enter increasingly large unrealized profit states.
Finally, we examined the short-term holder spent output profit ratio (STH-SOPR) metric to understand their selling behavior year-to-date. Using 90-day positive and negative standard deviation bands, we can identify potential reaction points. In recent weeks, we've observed weak spot seller behavior below the lower band, including at the $25,100 low point before the rally above $30,000.
Frequently Asked Questions
What determines how many Bitcoins are available for sale?
The available Bitcoin supply depends on several factors including holder sentiment, market conditions, profit-taking opportunities, and external regulatory developments. Typically, only a small percentage of total supply (3.5%-11.3%) is actively traded at any given time.
How does regional sentiment affect Bitcoin markets?
Different geographic regions show varying accumulation patterns based on regulatory environments, market maturity, and investor preferences. Asian markets have recently shown stronger accumulation trends, while U.S. demand fluctuates based on institutional developments like ETF applications.
What is "hot supply" in Bitcoin terms?
Hot supply refers to Bitcoin that has moved within the past 155 days and demonstrates high velocity (moving at least once per day on average). This represents the most liquid portion of Bitcoin supply that actively participates in price discovery.
How do short-term holders impact Bitcoin price?
Short-term holders (those holding Bitcoin for less than 155 days) typically react more strongly to price movements around their cost basis. Their behavior has shifted from seeking exit liquidity during bear markets to viewing break-even levels as accumulation opportunities in the current market.
Can Bitcoin absorb large sell pressures from events like Mt. Gox distributions?
Yes, historical analysis shows that quarterly demand inflows (400,000-900,000 BTC) have the capacity to absorb significant selling pressure from major events like Mt. Gox distributions (137,000 BTC) or government Bitcoin sales (204,000 BTC).
What indicators best predict Bitcoin price support levels?
The short-term holder cost basis and MVRV ratio provide excellent support indicators. When price approaches these levels and the rate of change declines to zero, it often signals equilibrium and potential accumulation opportunities.
Conclusion
The recent gold rush of institutional Bitcoin ETF applications in the United States has shown early signs of resurgent American demand, following a period of relative weakness throughout much of 2023. Meanwhile, Asian top exchanges have demonstrated the strongest accumulation trends to date.
Facing the prospect of potentially significant new buyer entry into spot Bitcoin markets, we've developed a framework to assess available Bitcoin supply and a toolkit to evaluate the expansion or contraction of new demand.
Our analysis of short-term holder behavior reveals a notable shift in market psychology from the 2022 bear market mentality. These investors now perceive break-even levels as opportunities to add to positions rather than exit liquidity, suggesting fundamentally stronger market foundations.