Structural Bitcoin Supply Scarcity Remains Extreme despite a Massive Price Rally → Insights

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Briefing

The core insight from on-chain data confirms that structural supply scarcity is the dominant market force, suggesting the current price action is supported by deep conviction from long-term investors. This trend indicates that despite a massive price rally, the average seasoned holder is significantly less willing to spend their coins than in previous cycles, which constrains available supply and creates powerful upward pressure. This supply-side rigidity is evidenced by the Entity-Adjusted Dormancy Flow, which is currently at 275K BTC per day, representing half the spending volume seen at the 2021 market peak.

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Context

The common question in the market is whether the recent multi-hundred percent price rally is sustainable, or if long-term investors are preparing to take massive profits that could flood the market and trigger a deep correction. Average investors are wondering if the supply of Bitcoin is drying up, or if the current price is merely a speculative bubble waiting to pop from veteran selling pressure.

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Analysis

Entity-Adjusted Dormancy Flow is a key indicator that measures the average age of all coins transacted on a given day, adjusted to filter out internal wallet movements. When Dormancy Flow is high, it means old coins are moving, signaling that long-term holders are spending and taking profits. When it is low, it signals that old coins are remaining dormant, confirming strong holding conviction. The data shows Dormancy Flow is currently at 275K BTC per day, which is 50% lower than the 550K BTC per day observed at the 2021 market peak.

This dramatically low spending rate, coupled with centralized exchange balances hitting a 13-year low of 2.02 million BTC, confirms that the coins that do exist are being held with unprecedented conviction. The structural scarcity is therefore more extreme now than at the height of the previous bull market.

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Parameters

Entity-Adjusted Dormancy Flow → 275K BTC per day. This is the daily value of coin-days destroyed, adjusted for internal transfers, showing the current rate of long-term holder spending.
Exchange Balances → 2.02 Million BTC. This is the total Bitcoin supply held on centralized exchanges, currently at a 13-year low.
Prior Cycle Dormancy Peak → 550K BTC per day. This was the peak long-term holder spending rate observed during the 2021 bull market top.
Cycle Price Gain → 656%. This is the price appreciation from the November 2022 market bottom to the recent highs, illustrating the context of the current low selling.

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Outlook

This structural analysis suggests the market’s path of least resistance remains upward, as the supply available to meet new demand is severely limited. The low Dormancy Flow acts as a powerful structural floor by removing the risk of a mass liquidation event from long-term holders. Readers should watch for a sharp, sustained spike in the Entity-Adjusted Dormancy Flow above 400K BTC per day as the primary counter-signal, which would suggest that veteran investors are finally beginning to distribute their supply at a rate that could overwhelm new demand.

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Verdict

The Bitcoin market is experiencing a profound supply shock because long-term holder conviction has never been stronger.

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