The supply of Bitcoin over cryptocurrency exchanges is decreasing as people are storing it for a long time. The market observers claim declining BTC supply is bullish as it will create an effect of scarcity.

According to Rafael Schultze-Kraft, the chief technology officer at Glassnode, investors and traders are not paying attention to decreasing supply, which is a crucial fundamental factor in pumping the price value upward.

Most of the Supply in Wallets

Approximately 14.4 million Bitcoin are under the custody of long-term holders, which represents 78% of the total circulating supply. And these long-term holders spend less than 25% of purchased holdings. He said:

“Illiquid entities spend less than 25% of the BTC they receive, acting as supply sinks in the network. Yes, only 12% of the BTC supply is liquid, according to this metric.”

He even revealed that miners are unwilling to cash out their holdings amid an exponential price hike. Since the latest halving, miners’ unspent Bitcoin has been surging. Currently, the total holdings of miners stand at 1.7 million Bitcoin. “The amount of miner unspent supply (BTC that has never left the miner address) has been increasing since the last halving. Current miner balance: 1.7 million BTC,” he added.

With the emergence of institutional players in the market, the quantity of the leading digital currency is declining at an alarming rate over the cryptocurrency exchanges. Since the beginning of the year, the supply of the flagship currency over crypto exchanges has decreased by 20%. While the presence of Bitcoin is in a depletion state over exchanges, the amount is surging in wallets as well as in storage holders.

Schultze-Kraft believes that these two factors, declining liquidity, and supply scarcity, will infuse a new bullish spirit into the cryptocurrency markets. And these are the things, which are continuously ignored by the investors. In the coming months, the scarcity of Bitcoin will play an important role in pumping the price value upward.

People go for assets that behave best in times of uncertainty in the global markets. Gold remained a popular hedge asset for years among global investors due to its shortage of supply. The only reason for the popularity in the lines of institutional investors is the scarce nature of Bitcoin, which is not even present in gold. Some investment firms have even sold their gold holdings in exchange for the top digital currency.