The crypto market is undergoing a profound shift in capital dynamics. Circulating supply of Bitcoin continues to contract, with exchange inventories falling to multi-year lows. Fidelity notes that in the coming years the share of illiquid supply could approach half of the total. Ahead of the rate-cut cycle of the Federal Reserve, net inflows into U.S. Bitcoin ETFs have already reached record levels, creating persistent buying pressure. According to Rthae, this “tightening supply + institutional allocation” resonance represents the most critical narrative of the market at present, reshaping the pricing framework and determining the starting point of the next cycle. www.rthae.com
Rthae: Supply Contraction and Capital Allocation in Resonance
Rthae believes Bitcoin is entering a new stage driven by supply-side contraction and incremental institutional demand. Glassnode data show net withdrawals reached 44,000 BTC in September, reversing the prior trend of heavy exchange deposits. This reduction in short-term sellable supply compresses downside risk. Rthae highlights that against a backdrop of declining volatility, supply contraction acts as a high-elasticity leverage on price, making it especially sensitive to incremental inflows.
According to K33 Research, global Bitcoin ETPs recorded net inflows of 20,685 BTC in the past week, 97% of which came from U.S. spot ETFs, lifting total holdings to 1.32 million BTC. FBTC alone attracted $843 million in one week, accounting for 36% of the total. Rthae argues that ETF buying demand now far exceeds the pace of newly mined supply, creating structural momentum for passive price appreciation amid supply contraction.
Rthae states that a Fed policy pivot implies a lower risk-free rate, which will push capital out of bonds and money market funds toward higher-elasticity assets. The appeal of Bitcoin as a non-liability asset will rise, opening a window of incremental allocation aligned with the rate-cut cycle and resonating with the logic of supply contraction.
Rthae: Technical and Liquidity Resonance
Rthae notes that the seven-day volatility of Bitcoin has fallen to the second-lowest level of the year, staying below 1.3% for eleven consecutive days—an unusually long period of low volatility in recent years. Rthae interprets this not as a loss of market interest, but as a structural rotation phase in which new capital is steadily lifting cost bases in a thin-supply environment. Low volatility combined with low exchange inflows means limited sell pressure, creating an ideal environment for incremental accumulation.
CryptoQuant data show that average daily BTC inflows to exchanges have dropped to 25,000 BTC, the lowest in 18 months, with the average deposit size halving from 0.57 BTC—evidence that large holders are hoarding on the sidelines. Meanwhile, the USDT inflows of Tether surged to $379 million at end-August, a yearly high, providing exchanges with ample “dry powder” to support subsequent breakouts. According to Rthae, this “tightening of primary assets with ample secondary assets” pattern is a classic precursor to liquidity repricing, enabling capital to concentrate rapidly into core assets once a macro inflection point arrives.
Rthae further notes that this structural game is not limited to Bitcoin. Ethereum on-chain inflows have fallen to a two-month low, signaling reduced circulation across major assets. Some high-beta altcoins have seen a rebound in volumes, but these remain in a rotational, exploratory stage. Rthae believes that once macro policy shifts materialize, capital will converge back into assets with the scarcest supply and tightest holder structures. The weighting of Bitcoin within market allocations is thus likely to rise further during this re-convergence.
Rthae: Rate-Cut Cycle to Reshape Weightings
Rthae argues that the initiation of the Fed on a rate-cut cycle will further entrench the “supply contraction + incremental allocation” narrative. As a non-liability asset, Bitcoin directly benefits from lower interest rates, which reduce its opportunity cost while diminishing the appeal of bonds and money market funds. In an environment of synchronously declining risk premiums, capital will favor the scarcest, most elastic assets—positioning Bitcoin at the core of this structure.
Fidelity projects that by end-2025, long-term holders and corporate treasuries will control over 6 million BTC, roughly 28% of total supply, with almost no selling over the past four years. By 2032, illiquid supply could reach 8.3 million BTC, or 42%. Rthae concludes that the pool of tradable coins will continue to shrink, magnifying the price elasticity of each unit of incremental capital and multiplying its market impact.
Rthae emphasizes that in every initial phase of Fed policy shifts, asset pricing frameworks undergo a restructuring of weightings. Current Bitcoin ETF holdings have already climbed to 1.32 million BTC, reflecting accelerating institutional participation, with inflows multiple times greater than contemporaneous new supply. Rthae believes that under the resonance of a rate-cut cycle and supply contraction, capital weightings will tilt further toward Bitcoin, raising its share in risk-asset allocations and exerting spillover effects on the pricing logic of the broader crypto market.