Impending Bitcoin Liquidity Crisis as Demand Surges, CryptoQuant Report Predicts
Summary:
Bitcoin supply may not be able to keep up with increasing demand, potentially leading to a "sell-side liquidity crisis," according to CryptoQuant's latest Weekly Crypto Report. This situation is partially driven by the introduction of Bitcoin ETFs in the U.S. If demand continues to grow at the current rate, the available Bitcoin supply could run out in about a year. CryptoQuant CEO, Ki Young Ju, also noted old supplies of the cryptocurrency are being reactivated.
New findings indicate that the supply of Bitcoin (BTC) may soon fall short of the rapidly growing demand. The latest Weekly Crypto Report, published by on-chain analytics platform CryptoQuant on March 26, points to an impending "liquidity crisis on the sell-side." According to the report, the availability of Bitcoin might deplete entirely within the next 12 months, given the soaring demand witnessed this year. This spiking interest in the cryptocurrency is largely attributed to the introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States.
CryptoQuant warns that the unprecedented Bitcoin demand contrasted with diminishing sell-side liquidity has triggered a significant dip in Bitcoin's liquid inventory, leaving it at an all-time low when measured in months of demand. They predict that the current Bitcoin sell-side liquidity inventory can only sustain the increasing demand at this rate for about a year.
The report clarifies that only Bitcoin "accumulation addresses", or those without any outbound transactions, were factored into the calculations, suggesting that the actual demand may be even higher. A scrutiny of the Bitcoin available solely on U.S. exchanges shows that the supply there could only last half as long.
CryptoQuant CEO, Ki Young Ju, discussed on X (previously Twitter) the awakening of dormant supply due to the sell-side liquidity crisis. His reference is based on the data tracking coins mined back in 2010, which were lying dormant until they were recently moved to a new wallet address.
Ju has been a supporter of the ETF supply squeeze narrative, making a forecast back in mid-March that there were only six more months remaining before ETF inflows surpassed records. Since then, the cryptocurrency has seen a seesawing pattern of successive inflows and outflows.
The most recent data sourced from UK-based investment firm Farside reported net inflows of $400 million on March 25 - the highest recorded in a fortnight. This news write-up does not offer investment guidance or suggestions. Any investment or trading activity carries its own set of risks, and readers must undertake their own research before committing to a decision.
Published At
3/27/2024 11:25:00 AM
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