Bitcoin’s Impending Supply Squeeze: A Looming Sell-Side Liquidity Crisis

• Bitcoin is on the brink of a supply squeeze, with demand potentially outstripping supply within the next year.
• CryptoQuant’s latest report highlights the dwindling sell-side liquidity of Bitcoin, forecasting a critical shortage.
• Historical Bitcoin movement spotted, with coins dormant since 2010 now on the move.

As Bitcoin faces a sell-side liquidity crisis with demand soaring, particularly due to US spot Bitcoin ETFs, the cryptocurrency market is preparing for a supply dynamics shift that could redefine its value proposition.

The Countdown Begins: Bitcoin’s Demand-Supply Disparity

An analysis by CryptoQuant predicts an imminent supply squeeze for Bitcoin, emphasizing that the current rate of demand growth will surpass available sell-side liquidity within the next twelve months. This unprecedented scenario, driven by record demand and diminishing liquid inventory, points towards a significant shift in Bitcoin’s supply dynamics by Q1 2025.

Understanding the Liquidity Inventory Crisis

The report elucidates that the current liquid inventory of Bitcoin is at its lowest in terms of months of demand, based on accumulating addresses alone. This suggests that the actual demand, inclusive of broader market participation, could be even higher, pushing the sell-side liquidity crisis to a critical juncture sooner than anticipated. The supply on US exchanges, crucial for meeting the demand from US spot Bitcoin ETFs, could run out in as little as six months, further exacerbating the liquidity squeeze.

Historical BTC Movement Signals Market Stir

Ki Young Ju of CryptoQuant points to the reawakening of Bitcoin mined in 2010, which has remained dormant for over a decade. This sudden movement of old coins to a new wallet address highlights the emerging sell-side liquidity crisis, marking the potential beginning of old supply mobilization to meet the burgeoning demand.

ETF Inflows and Outflows: A Balancing Act

Despite a recent week of net outflows from Bitcoin ETFs, a resurgence in inflows suggests a reversing trend, with Farside reporting a significant $400 million net inflow on March 25. This dynamic interplay between inflows and outflows underscores the complex landscape of Bitcoin’s supply and demand, further fueling speculation around the impending supply squeeze.

Conclusion

The looming sell-side liquidity crisis in Bitcoin presents both challenges and opportunities for the cryptocurrency market. As the gap between demand and available supply narrows, the market is poised for a significant reevaluation of Bitcoin’s value. With historical coins on the move and ETF dynamics in flux, the next year promises to be a pivotal period in Bitcoin’s evolution.