One of the key indicators of a potential Bitcoin (BTC) recovery is the decline in its "hot supply" — the number of coins available for active trading.

According to data from the on-chain analytics platform Glassnode, the Hot Supply metric, which tracks BTC aged one week or less, has decreased by 50% over the past three months. The share of such coins in Bitcoin's total circulating supply has dropped from 5.9% to 2.8%.

A decline in hot supply can be interpreted as both a bullish and bearish signal. In an optimistic scenario, a reduction in the number of actively traded BTC may indicate increased holding behavior, market stabilization, or even a potential supply shock.

The growing number of investors opting for long-term storage could reflect bullish sentiment, especially amid the current instability in the cryptocurrency market. Such behavior is often associated with expectations of future price growth.

Moreover, a decrease in hot supply contributes to reduced volatility, as it lowers the likelihood of sharp price fluctuations. This creates conditions for a more stable market, which could lead to price recovery and even growth in the medium term.

Another factor is the potential supply shock. With a decrease in the number of actively circulating BTC and stable or increasing demand, a shortage could occur, positively impacting Bitcoin's price.

However, current demand for Bitcoin remains weak compared to levels seen three to four months ago. This is confirmed by a 54% drop in BTC inflows to exchanges — from 58,600 to 26,900 coins per day.

Analysts also note that the decline in exchange inflows coincides with deteriorating investor sentiment and capital outflows. Bitcoin exchange-traded funds (ETFs) have experienced one of the most significant outflows in recent weeks, highlighting the lack of demand.

Nevertheless, this week saw three days of inflows into ETFs, which may indicate the beginning of a demand recovery. Thus, the decline in Bitcoin's hot supply could ultimately turn out to be a bullish signal.

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