BTC Moves Amidst Bitcoin ‘Sell-Side Liquidity Crisis’

According to a recent report by on-chain analytics platform CryptoQuant, Bitcoin (BTC) is facing a “sell-side liquidity crisis” as demand for the cryptocurrency continues to surge. The report highlights that Bitcoin’s sell-side liquidity inventory is at its lowest ever, with only enough supply to cover the current rate of demand for the next twelve months. It should be noted that this estimate only takes into account demand from accumulating addresses, meaning that the actual demand may be even higher.

The report also mentions that when considering BTC available strictly on U.S. exchanges, the supply is only able to meet demand for six months. This is because U.S. spot Bitcoin exchange-traded funds (ETFs) will only source Bitcoin from entities within the United States. The constant bid from these ETFs has contributed to the increased demand for Bitcoin this year.

CryptoQuant CEO Ki Young Ju commented on the sell-side liquidity crisis, stating that it is “waking up” old supply. This refers to the movement of coins mined in 2010 that have been dormant until recently. The sudden movement of these coins to a new wallet address indicates that the liquidity crisis is affecting even long-held Bitcoin.

Ju had previously predicted a six-month supply squeeze due to ETF inflows surpassing records. There has been a recent trend of consecutive net outflows from ETFs, although this appears to be reversing. Data from investment firm Farside shows net inflows of $400 million on March 25, the highest in two weeks.

The report suggests that the current surge in Bitcoin demand, coupled with declining sell-side liquidity, could result in a long-term change in supply dynamics by the first quarter of 2025. It remains to be seen how this liquidity crisis will impact the price and availability of Bitcoin in the future.