‘Bitcoin Liquidity Crisis’ – Getting Difficult to Buy on BTC Exchanges, Data Show


According to Glasnod analysts, it is increasingly difficult to buy bitcoins. The amount of BTC received and spent between entities is decreasing, meaning liquidity is decreasing.

If bitcoin (BTC) liquidity is low, it means that there is less BTC available to buy and sell. In the medium term, this may make BTC more rare.

Bitcoin Liquid and Illiquid Supply. Source: Glasod

Bitcoin on track for an explosive 2021

During 2020, bitcoins are rapidly accumulating in institutions, which has been forced due to its fixed supply.

In recent months, concerns about inflation and rising central bank liquidity have intensified. This trend has led high-profile institutional investors such as Paul Tudor Jones to consider bitcoin as a potential hedge against inflation.

Meanwhile, a trend from summer $ 425 million bitcoin purchase by MicroStrategy was handed over to other financial giants. Eventually, insurance groups such as PayPal, Square and even MassMutual came into the fray.

As a result, bitcoin’s institutional accumulation has accelerated. As a result, Glasnod found that only 4.2 million BTCs are in constant circulation for purchase and sale. company wrote:

“Bitcoin liquidity is defined as the average ratio of BTC received and spent in institutions. We show that currently 14.5M BTC is classified as illuminated, which is available for purchase and sale, except for only 4.2M BTC in continuous circulation. “

In the last 12 months, bitcoin valued at $ 27.8 billion has become unaltered. More long-term investors are occupying their BTCs, avoiding selling their assets.

If long-term holders move away from selling their BTCs, the major cryptocurrency will become more rare and difficult to accumulate.

Such a trend would increase the value of bitcoin in the long run, fueling the ongoing bull cycle. Analysts explained:

“During 2020, a total of 1 million BTCs have become illiterate – investors are migrating rapidly. This is rapid, and suggests that the current bull run is (partially) driven by this emerging #Bitcoin liquidity crisis. “

The miner has a variable

Another factor that may reduce the circulating supply of bitcoins in the future is miners.

Kyle Davis, co-founder of Three Arrow Capital, said there is a shortage of ASIC miners. Typically, miners invest capital to acquire hardware such as ASIC miners. But given that they are unable to buy, that could potentially inflow into BTC. that said:

A combination of several factors, such as increased activity, the possibility of miners selling fewer BTCs, and declining bitcoin liquidity could further increase BTC’s momentum in the first quarter of 2021.