As a seasoned researcher who has witnessed the ebb and flow of the cryptocurrency market for years, I can confidently say that the current state of the Bitcoin market is nothing short of intriguing. The shrinking supply relative to the accelerating demand presents an interesting dynamic that we haven’t seen in quite some time.
As we move deeper into the current bull run for cryptocurrencies, the number of bitcoins readily available for sale is decreasing at a faster pace compared to the increase in demand. According to on-chain analysis by the market intelligence firm CryptoQuant, the bitcoin market is currently undergoing a situation where demand is spiking due to rapid growth and supply is becoming scarce.
Based on a weekly report from CryptoQuant, it seems that the demand for bitcoin has been growing steadily since late September at a pace of approximately 228,000 BTC per month. At the same time, the total supply of bitcoin readily available for sale from crypto exchanges, OTC desks, miners, and the Grayscale Bitcoin Trust (GBTC) has reached levels not seen since October 2020, suggesting a potential decrease in the amount of BTC up for sale.
BTC Demand Is Eating Supply Inventory
Monthly, the number of Bitcoin (BTC) accumulator wallets, representing those who bought but haven’t sold their BTC, is growing at an all-time high pace of approximately 495,000 BTC.
2024 saw the steepest monthly drop in Bitcoin inventory at Over-The-Counter (OTC) desks since April 25, marking the first instance of such a decrease. This month’s decline represents approximately -26,000 BTC from their annual inventory, with an extra 40,000 BTC reduction in top-tier balances since November 2020.
As a crypto investor, I’ve noticed that over-the-counter (OTC) trading desks primarily cater to institutions and large buyers when it comes to Bitcoin. When the demand for Bitcoin exceeds its supply, OTC desks’ Bitcoin reserves start to dwindle, while the opposite is true when supply outpaces demand. As per CryptoQuant’s latest update, their Bitcoin balances are currently diminishing because the demand is surpassing the available supply.
Sell-side Liquidity Falls to 2020 Levels
With demand growing steadily, we’re seeing an increase in liquidity within the sector too. For the first time ever, the total value of USD-backed stablecoins surpassed the $200 billion mark, signifying a 20% jump or approximately $35 billion since late October. This surge indicates a significant injection of funds and liquidity into the cryptocurrency market. The expansion happened concurrently with Bitcoin (BTC) reaching beyond $100,000 to $108,000. At the time of writing, the worth of this crypto asset was reported as $96,700 according to CoinMarketCap data.
Additionally, the amount of bitcoin that can be sold (sell-side liquidity) is currently approximately 3.397 million Bitcoins, which is its lowest level in more than four years. This year, this sellable supply has decreased by about 678,000 Bitcoins, significantly lessening the possibility of selling pressure.
Additionally, it’s worth noting that the liquidity inventory ratio, which indicates how many months of sales the existing inventory can cover, has dropped significantly from 41 months at the start of October to just 6.6 months currently. According to CryptoQuant, a decrease in this ratio often aligns with the strong Bitcoin price surges experienced during the first and fourth quarters of 2024.
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2024-12-22 10:24