What happened?
Spot Bitcoin ETFs and large custodial funds have been pulling big chunks of Bitcoin into long-term custody while U.S. government-linked wallets have been quietly moving coins between addresses. Together these flows are noticeably shrinking the amount of Bitcoin available on exchanges and in active circulation. That overlap—strong institutional accumulation alongside opaque public holdings—is changing how price reacts when most available supply is already spoken for.
Who does this affect?
Retail and professional investors alike are affected, from day traders who rely on deep order books to institutions that use ETFs for portfolio exposure. ETF holders and fund managers now contend with large custodians like IBIT holding a meaningful share of supply, which changes allocation dynamics. Traders who depend on exchange liquidity face greater risk because government transfers and shrinking float can trigger sudden, larger moves.
Why does this matter?
With ETFs soaking up coins and exchange balances dropping, markets are becoming thinner, so price moves can be sharper and more volatile. If government-held coins are ever liquidated, that uncertainty could amplify sell pressure and lead to bigger corrections than in the past. Overall, this makes Bitcoin behave more like a less-liquid asset, so investors need to factor in liquidity risk, timing, and potentially longer holding periods.