Nearly 80% of Circulating Bitcoin (BTC) Supply Is Illiquid, Hardly Accessible for Buying, which Is Bullish: Report

78% of the circulating Bitcoin (BTC) supply is now “illiquid and therefore hardly accessible for buying,” according to crypto data provider glassnode.

The on-chain market analysis provider claims that this “points to a bullish investor sentiment as large amounts of BTC are being hoarded – which reduces sell pressure.”

The glassnode team reveals that they recently analyzed Bitcoin entities and classified them into the highly liquid, liquid, and illiquid categories. The research firm’s methodology indicates that there are around 14.5 million BTC (about 78% of the circulating Bitcoin supply) that’s being held by “illiquid entities.” The firm claims that its analysis shows “a clear relationship between Bitcoin liquidity and the BTC market.”

The glassnode team points out that 88.5% of the total BTC supply has been mined, which means the circulating supply of the cryptocurrency is around 18.6 million (as of December 31, 2020).

But the number of Bitcoins “actually available for buying and selling, is much lower,” according to glassnode.

They further noted:

“Not only can we expect that a substantial amount of mined BTC is lost forever (we estimate this number to be ~3M BTC), but as Bitcoin continues to become more and more a Store of Value and investors increasingly HODL making use of it as a safe haven asset to store wealth, the actual ‘liquid’ Bitcoin supply can be expected to be considerably lower.”

The researchers added:

“If many bitcoins are illiquid, a supply-side crisis emerges – which has a weakening effect on BTC’s selling pressure in the market. Or put differently: A sustained rise of illiquid bitcoins is an indication of strong investor hodling (holding on to the asset long-term and not trying to sell) sentiment and a potential bullish signal.”

At the time of writing, the illiquid supply of BTC stands at roughly 14.5 million, the liquid supply stands at about 1.2 million BTC, and the highly liquid supply at 3 million BTC. As confirmed by glassnode, that means that “around 78% of the circulating Bitcoin supply is considered illiquid.” Moreover, only 4.2 million BTC (appr. 22%) are “currently in constant circulation and available for buying and selling.”

The cryptocurrency analysis firm concludes that research shows that there’s been a steady rise in the number of illiquid Bitcoins, “a trend that has been increasing over the course of 2020 and paints a potential bullish picture for Bitcoin in the upcoming months, as less BTC are available in the network to be bought.”

The glassnode team added

“Understanding Bitcoin liquidity is an important macro signal that demonstrably has a clear relationship with the BTC’s price.”

(Note: you can check out the complete analysis here.)

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