Let me explain the doubts of my friends once again. The relationship between the Bitcoin supply on exchanges, its price, and investor sentiment.

The supply of Bitcoin on exchanges does not have a direct impact on its price, which is inevitable. Many times, a one-time sell-off of over 500 $BTC can cause price fluctuations, especially during weekends and holidays, while there are still over 2 million BTC on exchanges. Therefore, I have said many times that the supply on exchanges does not equate to the rise or fall of BTC prices.

This data more represents investor sentiment. For example, from the data of exchange supply over the past six years, we can see that the two price increases in early 2020 and early 2023 were accompanied by an increase in Bitcoin supply on exchanges. Why is that? Because during these periods, investors did not treat $BTC as a "strategic long-term reserve" asset. This was especially evident in 2020 when a large amount of Bitcoin entered exchanges after the price increased, aiming to find a better exit opportunity.

Since Bitcoin cannot be traded on-chain as easily as $ETH, the main market for BTC trading is still on exchanges. After the price rises, a large amount of BTC is transferred in as a speculative product, until the collapse of Luna and FTX in 2022.

In 2023, although there was an increase in supply with the price rise, it was more about the anticipation of the approval of Bitcoin spot ETFs. The structure of investors did not change; speculative investors still dominated, but some institutions and high-net-worth investors began to believe that BlackRock's entry might not be short-term. Thus, it is evident that although 2023 broke the price peak of 2021, the supply on exchanges has decreased significantly compared to the highest peak in 2021.

This indicates that some investors have quietly transitioned into long-term investors.

By the end of 2024, the price increase will mainly be driven by institutional purchases of spot ETFs and Trump's commitment to Bitcoin as a strategic reserve, compounded by the leniency of the SEC and CFTC. This has led institutions and high-net-worth investors to be willing to hold Bitcoin long-term, resulting in a more significant divergence between BTC supply and price.

Whether BTC rises or falls, there is stronger purchasing power to buy BTC, which represents investor sentiment. Investors believe in the future of BTC, so they are willing to buy actively. Conversely, if they only see BTC as a short-term speculative product, like some investors in spot ETFs, then the supply on exchanges cannot decrease; it will only continue to rise.

Therefore, the supply of BTC on exchanges does not represent price fluctuations but rather reflects changes in investor sentiment. At least for now, most BTC holders still believe in the future of Bitcoin. Thus, the supply is gradually decreasing.

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