The Bitcoin market is witnessing a historic supply squeeze, with liquid reserves plummeting to levels unseen since December 2017. Data from on-chain analytics firm Glassnode reveals that only 2.3 million BTC (roughly 11.8% of the total supply) are currently classified as “highly liquid.” This figure represents a dramatic decline of 330,000 BTC over the past year alone, accelerating a long-term trend of coins migrating from exchanges and active trading wallets into long-term storage.
Understanding the Liquidity Crunch:
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“Highly Liquid” Supply: This refers to Bitcoin held on exchanges, in custodial wallets of large traders, or by entities frequently moving coins. These are coins readily available for sale.
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The “Illiquid” Majority: Conversely, a staggering 14.85 million BTC (76.3% of supply) are deemed “illiquid” – held in wallets with little history of spending, indicating strong conviction (HODLing) or loss. A further 2.1 million BTC (10.8%) fall into the “moderately liquid” category.
Key Drivers of the Supply Squeeze:
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Accelerated Accumulation: Long-term investors (often called “whales” and institutional players) are aggressively accumulating BTC, withdrawing coins from exchanges to cold storage or custodial solutions designed for holding, not trading.
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Spot ETF Phenomenon: The explosive success of US Spot Bitcoin ETFs, holding over 850,000 BTC collectively, has permanently locked away a massive chunk of supply. These ETFs act as one-way sinks; inflows require brokers to buy BTC from the open market, but outflows result in BTC being sold by the ETF issuer, not returned directly to investors. This continuously pressures the available liquid supply.
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Halving Anticipation & Macro Uncertainty: The recent April 2024 halving, reducing new BTC issuance, combined with broader economic concerns, reinforces the “store of value” narrative, encouraging long-term holding.
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Declining Exchange Reserves: Exchange BTC balances continue their multi-year downtrend, significantly reducing the immediate sell-side pressure available on trading platforms.
Expert Insight:
Minh Trang, a market analyst quoted in the original Vietnamese article, emphasizes the significance: “The sharp decline in liquid Bitcoin supply is a powerful indicator of prevailing market sentiment. It underscores a collective shift towards holding rather than trading, driven by expectations of future price appreciation. This scarcity, particularly against the backdrop of sustained ETF demand, creates a fundamentally tight supply environment.”
Market Implications:
This extreme supply constraint is a classic bullish fundamental signal. Basic economic principles suggest that dwindling supply, coupled with steady or increasing demand (like that driven by ETFs), typically exerts significant upward pressure on price. While short-term volatility persists due to macroeconomic factors and sentiment shifts, the underlying supply-demand dynamics point towards a structurally stronger foundation for Bitcoin’s value. The current liquidity levels haven’t been this tight since Bitcoin traded around $15,000-$20,000 – a stark contrast to today’s significantly higher valuation floor.
Conclusion:
The plunge in Bitcoin’s liquid supply to a 6-year low is more than just a statistic; it’s a reflection of a profound shift in market structure. The combination of relentless accumulation, the locking effect of ETFs, and the natural progression of coins into long-term storage is creating unprecedented scarcity on the open market. This intensifying scarcity forms a critical pillar supporting Bitcoin’s long-term value proposition and sets the stage for potentially heightened price sensitivity to surges in demand.
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