Bitcoin Liquidity Crunch: First Movement Since 2010 Sparks Concern

Crypto News- New findings reveal a looming crisis in the world of Bitcoin. According to the latest insights from CryptoQuant, a sell-side liquidity crisis is unraveling, painting a bleak picture for the future of the cryptocurrency.

Bitcoin Liquidity Crunch: First Movement Since 2010 Sparks Concern

The report, released on March 26, warns that Bitcoin is hurtling towards a critical juncture where demand will soon overshadow supply. With the recent surge in Bitcoin demand, fueled in part by the introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States, the pressure on available Bitcoin is intensifying.

Bitcoin’s Supply Dynamics on the Brink: CryptoQuant Warns of Irreversible Changes by 2025

The situation is dire: CryptoQuant predicts that by the first quarter of 2025, the dynamics of Bitcoin’s supply may undergo irreversible changes. The report highlights that Bitcoin’s liquid inventory has plummeted to unprecedented lows in terms of months of demand.

According to CryptoQuant’s estimates, the current Bitcoin sell-side liquidity inventory can only sustain demand growth at the current rate for a mere twelve months. And that’s just the tip of the iceberg. The analysis only takes into account demand from accumulating addresses, which are essentially those wallets with no outbound transactions. This means that the actual demand could be even higher.

Bitcoin Supply Crunch: US Exchange Reserves Only Cover Six Months of Demand

Delving deeper into the data, the report reveals a stark reality: even if we focus solely on Bitcoin available on United States exchanges, the supply falls short of meeting demand, with only enough inventory to cover six months of demand.

Adding to the sense of urgency is the movement of old Bitcoin supply that has long lain dormant. CryptoQuant CEO Ki Young Ju likened this to a wake-up call for the market, as coins mined back in 2010 suddenly spring to life, moving to new wallet addresses. Ju has been vocal about the implications of the ETF supply squeeze, previously predicting a six-month window before the crunch hits. While ETF inflows have broken records, recent weeks have seen a concerning trend of consecutive net outflows, although this appears to be shifting.

Fresh data from Farside, a UK-based investment firm, underscores the gravity of the situation, with net inflows of $400 million recorded on March 25—the highest in two weeks.

As the clock ticks down and Bitcoin’s future hangs in the balance, the industry braces for what could be a seismic shift in supply dynamics, with profound implications for investors and enthusiasts alike.