Bitcoin ‘Hot Supply’ Plunges 50%—What Does This Mean?

On-chain data shows the Hot Supply metric has observed a sharp drop for Bitcoin recently. Here’s what this could mean for the cryptocurrency.

Bitcoin Hot Supply Is Down To Just 2.8% Now

According to data from the on-chain analytics firm Glassnode, the Bitcoin Hot Supply has significantly gone down over the last three months. The “Hot Supply” refers to an indicator that keeps track of the tokens in circulation that last saw a movement within the past week.

This portion of the BTC supply is considered its most liquid, with coins part of it consistently being in motion. Below is the chart shared by the analytics firm, that shows how this supply has changed for the cryptocurrency over the last couple of years:

As displayed in the graph, the Bitcoin Hot Supply spiked to a high during the bull rally from last year, meaning that there was a large amount of constant trading going on.

With the bearish shift that has occurred in the last few months, however, the indicator’s value has seen a significant decline. In total, the metric has decreased by more than 50% in the past three months, coming down from a high of 5.9% to just 2.8%. “This signals a sharp reduction in liquid BTC available for trade,” notes Glassnode.

Another indicator that would corroborate this trend is the Exchange Inflow, which measures the total amount of the asset that the investors are transferring to wallets attached with centralized exchanges.

Generally, the holders deposit their tokens to these platforms for selling-related purposes, so the Exchange Inflow can be considered as a gauge for the sell-side activity in the sector.

Here is a chart for the Bitcoin Exchange Inflow, which displays how the metric’s value has changed during the last couple of years for the various cohorts:

During the rally, the Bitcoin Exchange Inflow had a value of 58,600 BTC per day, meaning the exchanges were receiving deposits amounting to 58,600 tokens every day. Today, as the market activity has cooled off, the indicator has declined to 26,900 BTC per day. “Lower inflows indicate reduced sell-side activity but also weaker demand,” explains the analytics firm.

The spot market isn’t the only one that has seen reduced trading activity, as Glassnode has pointed in another X post that the Futures Open Interest, a measure of the total amount of futures positions related to Bitcoin currently open on exchanges, has also witnessed a notable drawdown since the price all-time high (ATH).

The Bitcoin Futures Open Interest was at $57 billion at the ATH, but now its value has plunged to $37 billion, representing a drop of 35%. “This decline mirrors the contraction seen in on-chain liquidity, pointing to broader risk-off behavior,” says the analytics firm.

BTC Price

Bitcoin recovered above $87,000 yesterday, but it seems the coin has seen another setback as it’s now back at $85,000.