Bitcoin has jumped back above the $26,000 mark, after languishing in $25,000 territory for over one week.
Bitcoin's liquid supply is shrinking as investors are removing their coins from exchanges and stowing them away in cold storage wallets.
These long-term investor wallets have a history of holding and accumulating bitcoin. Recent data from on-chain analytics firm Glassnode showed that 95% of the existing supply of bitcoin has not moved in the past 30 days.
Read more: Crypto live prices
Coupled with this, CryptoQuant data showed that 29,300 bitcoin have been removed from cryptocurrency exchanges in the past month. The number of bitcoin in ready, liquid, supply has fallen from 2,082,763 to 2,053,460, a fall of over 1.4%.
This shrinking supply could coincide with a sudden increase in demand in the form of "big money buyers", according to one analyst.
"95% of all bitcoin has not moved in the last 30 days. Despite the weak market, only 5% is moving around.
"Imagine there’s a catalyst and imagine big money wants to jump in and buy a truckload of bitcoin? The price will just go parabolic. When the big institutions come, they will be fighting over that 5%," an analyst at Invest Answers said.
Spot bitcoin ETF decision deadlines in October
October is expected to witness increased market volatility, primarily due to key events occurring in the middle of the month.
The US Securities Exchange Commission's (SEC) 45-day window is set to expire for reviewing the Grayscale spot bitcoin exchange traded fund (ETF) application.
Slightly later in the month, on October 16, is the second deadline of the BTC ETP Trust Bitwise. And on October 17 is the second deadline for BTC ETO Trusts from BlackRock (BLK), Fidelity, Wisdomtree and Invesco.
Investors are accumulating bitcoin in anticipation of a market moving decision in October. There is a hope that an SEC decision on a spot bitcoin ETF will bring regulatory clarity so that traditional finance can invest with reduced risk in the digital asset.
Speaking to Yahoo Finance's Brian Sozzi, Coinbase (COIN) CEO Brian Armstrong said his firm is "looking for regulatory clarity".
The co-founder of the world's second largest cryptocurrency exchange by trading volume said regulatory clarity would help the firm prioritise their investments.
Because of lack regulatory clarity in the US, Coinbase is focusing its efforts overseas. "We just launched in Canada last month and also our international derivatives exchange May, which is important as derivatives trading is a big piece of the crypto ecosystem," Armstrong said.
However he added that there is still broad recognition in the US that crypto technology is important and that it is not going anywhere.
"It needs to done in a safe and trusted way for American consumers to make sure this doesn't go off-shore as there are important national security implications for the US here," Armstrong added.
Ark invest seeks regulatory approval of spot ether ETF
Cathie Wood's Ark Invest and crypto investment firm 21Shares are seeking regulatory approval to set up an exchange-traded fund that would directly hold ether (ETH-USD), according to an SEC filing this week.
This is the first attempt to list a fund in the U.S. that would directly invest in the second-largest cryptocurrency by market capitalisation. The fund would trade under the ticker ARKE.
Speaking to Bloomberg, the Ark Invest CEO said: “There’s been so much regulatory controversy about a bitcoin spot ETF that I guess many people thought it was a step too far, but we don’t, and it’s always nice to be first.”
Ethereum climbed almost 1% in the past 24 hours, now changing hands for $1,643, according to CoinGecko. The global cryptocurrency market cap on Friday was $1.09tn, up 1.2% in the past day.