Bitcoin Supply Tightens as Exchange Holdings Decline
Bitcoin’s price stability near $116,000 is underpinned by a notable reduction in coins held on centralized exchanges. Data from Glassnode indicates a net withdrawal of 44,000 BTC in September, reversing earlier deposits and constricting immediate liquidity. This contraction in exchange supply reduces the available coins for sale, potentially limiting short-term downward price pressure.
Spot Bitcoin ETFs Drive Persistent Demand
Complementing the supply squeeze, US-listed spot Bitcoin ETFs have recorded $2.2 billion in net inflows over a recent five-day period. This influx translates into daily buying activity that significantly surpasses the approximately 900 newly mined Bitcoins each day, reinforcing upward price momentum. The sustained investor accumulation through ETFs signals growing confidence in Bitcoin as an asset class, especially in contrast to gold’s recent 11% outperformance since August.
Bitcoin’s Position Ahead of Federal Reserve Decision
Bitcoin’s price has remained range-bound within a 2.3% band since Friday as market participants await the Federal Reserve’s interest rate announcement scheduled for Wednesday. Futures markets currently price in a 96% probability of a 25 basis point rate cut from 4.5% to 4.25%. However, the effect of such a cut on Bitcoin remains uncertain. Investors will closely monitor Fed Chair Jerome Powell’s post-announcement commentary for cues on the trajectory of future rate adjustments and inflation risks, which could influence Bitcoin’s near-term performance.
Market Stress and Alternative Hedging Narrative
Adding complexity to the macroeconomic backdrop, US banks borrowed $1.5 billion from the Fed’s Standing Repo Facility on Monday, indicating potential liquidity strains. Additionally, overnight lending rates have risen to 4.42%, the highest in two months, signaling tighter funding conditions. These factors contributed to gold’s surge to an all-time high on Tuesday, underscoring broader market uncertainty.
In this environment, Bitcoin’s appeal as an independent hedge is gaining attention. Eric Trump, co-founder of American Bitcoin (ABTC), emphasized Bitcoin’s unique qualities in a recent CNBC interview, describing it as the “greatest asset of our time” and likening it to a modern version of gold. He also highlighted Bitcoin’s effectiveness as a hedge against weaknesses in the real estate sector, a perspective that may bolster institutional and retail demand.
Outlook
While the Federal Reserve’s upcoming rate decision introduces an element of uncertainty, Bitcoin’s constrained supply on exchanges combined with robust ETF inflows and its evolving role as a financial hedge support the potential for a price rally toward $120,000. Market participants should watch for shifts in liquidity conditions, Fed policy signals, and sustained ETF demand to gauge Bitcoin’s trajectory in the near term.
Disclaimer: This article is for informational purposes only and does not constitute investment or legal advice. The views expressed are those of the author and do not necessarily reflect those of Cointelegraph.
FinOracleAI — Market View
Bitcoin’s recent supply contraction on exchanges coupled with substantial spot ETF inflows creates a bullish short-term setup. The diminishing liquid supply reduces selling pressure, while ETF demand consistently outpaces new mining supply, supporting upward momentum. However, the upcoming Federal Reserve rate decision and potential market liquidity stress remain key risks that could temper gains. Investors should monitor Fed communications and repo market activity closely to assess sustained buying interest and liquidity conditions.
Impact: positive
