The research by CryptoQuant sheds light on the fact that Bitcoin’s sell-side liquidity is decreasing.
According to fresh observations from CryptoQuant’s “Weekly Crypto Report” dated March 26, Bitcoin is about to experience a shortage in supply.
According to the research, the advent of spot Bitcoin ETFs in the US is a major factor driving up demand for the cryptocurrency, which is causing a “sell-side liquidity crisis” to become imminent.
This dramatic change in Bitcoin’s market dynamics, brought about by rising demand and falling supply, may permanently change the cryptocurrency’s supply picture by the beginning of 2025.
The research by CryptoQuant sheds light on the fact that Bitcoin’s sell-side liquidity is decreasing. According to the platform, the liquid Bitcoin inventory has hit an all-time low in terms of months of demand due to record Bitcoin demand and declining sell-side liquidity. They estimate that the current inventory can only meet the growing demand for about twelve months.
There may be even more demand than what’s being considered here since the study only considers “accumulating addresses,” or wallets that have not yet sent funds out.
“This is simply examining demand from collecting addresses, which may be seen as the lower end of Bitcoin demand,” CryptoQuant explains.
When looking at Bitcoin’s availability on US exchanges alone, the window of opportunity to satisfy demand is cut in half.
“Bitcoin liquid inventory decreases to six months’ worth of demand when Bitcoin traded on exchanges outside the United States is excluded.”
The company will not do business with these exchanges since US spot Bitcoin ETFs would only buy Bitcoin from US businesses, according to the article.
The CEO of CryptoQuant, Ki Young Ju, recently spoke about the growing sell-side liquidity issue on X, which was once Twitter.
The unexpected movement of bitcoins generated in 2010 but left idle since then to new wallet addresses was something he remarked on.
Even when ETF inflows reached new highs in mid-March, Ju—a strong believer in the ETF supply squeeze theory—predicted a window of opportunity that would last six months.
Latest data from Farside, a UK investment business, shows substantial net inflows of $400 million on March 25, the biggest in two weeks—despite a short period of net withdrawals from similar products.
As the supply of Bitcoin tightens, this data shows that investors are still interested in investing in the cryptocurrency, which might mean that its market dynamics are about to undergo a transformation.
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