Institutional Demand Fuels Bitcoin Shortage on Exchanges

Bitcoin reserves on cryptocurrency exchanges have dropped to their lowest level in three years, raising concerns about a potential supply shock as institutional investors continue to accumulate the asset. Data from CryptoQuant indicates that exchange reserves now stand at 2.5 million BTC, the lowest since 2022.

A supply shock occurs when strong buying pressure meets a diminishing available supply, often leading to significant price appreciation. With institutional demand, particularly from exchange-traded funds (ETFs), continuing to grow, the market is witnessing a tightening of available Bitcoin.

Bitcoin Holds Above $95,000 Despite Market Pressures

Bitcoin has maintained its position above the crucial $95,000 support level despite significant selling pressure and macroeconomic concerns. In the past 24 hours, BTC has risen by 0.4%, trading at over $97,000 at the time of writing. This resilience comes amid growing uncertainty in global trade following the imposition of new import tariffs by the United States and China.

Bitcoin exchange reserves, all exchanges. Source: CryptoQuant

Despite experiencing the largest daily selling pressure since the collapse of Three Arrows Capital (3AC) in June 2022, Bitcoin has managed to sustain its value. Analysts suggest this is due to strong institutional interest and signs of “seller exhaustion.” According to Ryan Lee, chief analyst at Bitget Research, this phenomenon indicates that the market may be shifting from selling to buying pressure.

Lee further noted that broader economic factors, technological advancements, and key psychological support levels play a crucial role in stabilising Bitcoin’s price action. However, concerns remain over stagnating inflows into spot Bitcoin ETFs, which could continue to influence price movements.

ETF Outflows Add to Market Uncertainty

While institutional demand has been a driving force behind Bitcoin’s recent resilience, net outflows from US-based spot Bitcoin ETFs have raised concerns. On February 10, these ETFs recorded net negative outflows of over $186 million, wiping out the previous day’s net positive inflows of $171 million, according to Farside Investors.

Bitcoin ETF flows (US dollar, million). Source: Farside Investors

If Bitcoin fails to hold the $95,000 support level, analysts warn that the market could see heightened volatility. A correction below this level could trigger the liquidation of over $1.52 billion in leveraged long positions across all major exchanges, according to data from CoinGlass. Such an event could drive prices even lower in the short term.

Bitcoin’s Outlook for 2025 Remains Bullish

Despite concerns of a potential short-term correction below $90,000, long-term projections for Bitcoin remain optimistic. Many analysts predict a price surge throughout the rest of 2025, with estimates ranging between $160,000 and $180,000.

The diminishing supply on exchanges, coupled with sustained institutional interest, suggests that Bitcoin may be gearing up for another major rally. If the market continues to see strong demand amid tightening supply, prices could appreciate significantly in the coming months.

For now, maintaining the $95,000 psychological support level will be critical in preventing further downside volatility and ensuring bullish momentum for Bitcoin in the near future.

Major Sell-Off Fails to Break Key Support Level

Bitcoin has maintained its position above the critical $95,000 mark, despite facing the most intense selling pressure since 2022. The cryptocurrency briefly dipped to a one-week low of $94,726 on 9 February before staging a recovery, according to data from Cointelegraph Markets Pro.

This resilience is particularly notable given the scale of selling, which rivalled that seen during the collapse of Three Arrows Capital (3AC) in 2022, according to André Dragosch, head of research at Bitwise Europe.

BTC/USD, 1-month chart.

“We have just reached the highest amount of selling pressure on Bitcoin spot exchanges since the collapse of 3AC in June 2022. Yet, the price is still close to $100,000,” Dragosch stated in a 10 February post on X.

Analysts suggest that Bitcoin’s ability to withstand such pressure may indicate “seller exhaustion,” with the market absorbing the influx of sell orders without a dramatic collapse.

Impact of the Three Arrows Capital Collapse

The comparison with the 3AC crisis highlights the severity of the current market conditions. The Singapore-based hedge fund, which once managed over $10 billion in assets, collapsed in 2022 after making high-risk trades, including a $500 million Bitcoin exchange with the Luna Foundation Guard.

The fund’s failure triggered a domino effect, leading to the bankruptcy of major crypto lenders such as BlockFi, Voyager, and Celsius, all of whom had significant exposure to 3AC.

$93K Support Level Critical Amid Trade War Fears

While Bitcoin has rebounded, investor sentiment remains fragile due to global trade war concerns. The recent announcement of new import tariffs by both the United States and China has intensified economic uncertainty.

Market analysts warn that a fall below the crucial $93,000 support level could result in significant volatility. Data from CoinGlass indicates that such a drop would trigger the liquidation of over $1.7 billion in leveraged long positions across exchanges.

Ryan Lee, chief analyst at Bitget Research, predicts that if Bitcoin breaches this threshold, it could decline further to $91,500. Escalating trade tensions could even push Bitcoin below $90,000 in the short term, despite its reputation as a hedge against traditional financial instability.

Trump-Xi Meeting Delayed Amid Market Uncertainty

Traders are closely monitoring developments in US-China trade negotiations, as these could significantly impact global markets, including cryptocurrencies.

BTC: Intraday spot buying minus selling volume. Source: André Dragosch

Former US President Donald Trump was set to meet with Chinese President Xi Jinping on 11 February to discuss trade tensions. However, according to a 4 February Wall Street Journal report citing unnamed US officials, the meeting is likely to be delayed.

Uncertainty surrounding the talks has further weighed on market confidence, with investors bracing for potential economic disruptions that could influence Bitcoin’s price trajectory.

Despite these headwinds, Bitcoin’s ability to hold above $95,000 signals strong underlying demand. However, with geopolitical and economic pressures mounting, the coming weeks will be critical in determining whether Bitcoin can maintain its resilience or succumb to further market shocks.

US Job Data Sparks Market Optimism

Bitcoin surged past the $100,000 mark on February 7 as Wall Street reacted positively to mixed US employment data. The leading cryptocurrency defied concerns over Federal Reserve policy, capitalizing on weaker-than-expected job additions.

According to TradingView, Bitcoin spiked sharply after new employment figures revealed that the US added just 143,000 jobs in January, falling short of the projected 169,000. This unexpected slowdown in job growth fuelled optimism in risk markets, including cryptocurrencies and stocks.

BTC/USD 1-hour chart. Source: TradingView

The weaker labour market report suggested that the US economy might not be as resilient to restrictive financial policies as previously thought. However, despite market enthusiasm, the latest CME Group FedWatch Tool estimates indicated that traders are now largely ruling out the possibility of an interest rate cut at the Federal Reserve’s upcoming March meeting. The odds of a 0.25% rate cut fell from 14.5% before the jobs data release to just 8.5%.

“The unemployment rate fell to 4.0%, below expectations of 4.1%,” noted trading resource The Kobeissi Letter on X (formerly Twitter). “We now have the lowest unemployment rate since May 2024. The Fed pause is here to stay.”

Bitcoin’s Technical Breakout and Key Resistance Levels

Despite macroeconomic uncertainty, Bitcoin’s sudden rise fuelled fresh optimism among traders, with many viewing the move as a significant breakout.

Popular trader Daan Crypto Trades shared a chart on X, showing that BTC/USD had broken out from a falling wedge pattern on the hourly chart. “Higher low made, now needs to break that local high at ~$102K to leave this area behind. That’s what the bulls should try to accomplish to flip the market structure back to bullish on this timeframe,” he explained.

Fed target rate probabilities. Source: CME Group

On the four-hour chart, fellow analyst Roman echoed the sentiment, predicting further gains and a strong weekly close. “1D & 1W have completely reset to break this range and continue our uptrend to 130K,” he noted. However, he pointed out that Bitcoin still faces resistance at $108,000, which could be a decisive level for the next move.

Meanwhile, another well-known trader, Skew, argued that Bitcoin must consolidate above $100,000 on lower timeframes to sustain its bullish momentum. He identified $102,000 as a crucial threshold that bulls need to surpass to confirm a trend continuation.

“Positioning likely picks up again with trend resolution,” Skew stated, suggesting that further upside momentum could emerge if Bitcoin successfully holds key levels.

Market Outlook

Bitcoin’s rise to six figures, despite ongoing concerns over Federal Reserve policy and macroeconomic conditions, reflects renewed confidence in digital assets. However, analysts caution that sustained growth will depend on Bitcoin’s ability to overcome critical resistance levels.

With traders eyeing a potential move towards $130,000, all attention will now be on whether BTC can decisively hold above $100,000 and break through $102,000 in the coming days.

Mining Difficulty Reaches Record Highs

Bitcoin miners experienced a drop in monthly production in January as the network’s mining difficulty surged. The increased computational power required to validate transactions and mine new blocks put significant pressure on mining firms, with many seeing a downturn in output.

Leading Bitcoin miners, including Hut 8, Marathon Digital (Mara), and Bitfarms, reported a decline in production compared to December 2024. However, Riot Platforms defied the trend, recording a 2.1% increase in Bitcoin production.

Rising Network Difficulty Impacts Miners

Throughout January, Bitcoin’s network difficulty hovered around an all-time high of 110 trillion (T). This marks a 27.8% increase since the last Bitcoin halving event on April 20, 2024.

Source: Riot Platforms

Anticipating this surge in difficulty, mining companies have been upgrading their hardware and optimising operations to maintain profitability. Despite these efforts, many firms struggled to keep up with the rising computational demands.

Hut 8, for instance, mined only 65 BTC in January, marking a 27% drop from the previous month. Similarly, Marathon Digital saw a 12.5% decline, while Bitfarms recorded a 4.7% reduction in Bitcoin output.

Riot Platforms Expands Operations

In contrast to its competitors, Riot Platforms increased its Bitcoin production by commissioning a new mining facility in Texas. The company initiated a large-scale 1-gigawatt development to enhance its mining capabilities.

Jason Les, CEO of Riot Platforms, highlighted the impact of the expansion, stating:

“The Corsicana Facility reached a deployed hash rate of 15.7 EH/s towards the end of the month. We also continue to see strong results from newly deployed miners and immersion systems, reflected in the significant improvement in our operational hash rate and utilisation rates.”

 Bitfarms monthly Bitcoin production. Source: Bitfarms

Meanwhile, Hut 8 CEO Asher Genoot announced that the company is nearing completion of infrastructure upgrades that should bolster its mining capacity in the coming weeks.

Future Outlook for Bitcoin Mining

Although mining difficulty reached 110T earlier in January, it fell slightly to 108T by the month’s end, leading to an estimated hashrate of around 832 exahashes per second (EH/s).

Industry analysts predict a potential decline in Bitcoin mining hashrate due to reduced difficulty levels and fewer preorders for mining equipment. While some companies, such as Riot Platforms, continue to expand their operations, others may struggle to maintain profitability in an increasingly competitive landscape.