At the onset of 2025, there’s a strong likelihood that Bitcoin (BTC) might undergo a substantial drop during the initial three months. Yet, decreasing supply from sellers indicates that Bitcoin could potentially witness more growth in the mid-term period as well.
In the most recent issue of the Bitfinex Alpha report, analysts suggested that the significant drop predicted for Q1 2025 in bitcoin prices might have already lessened during its double-digit correction in mid-December. With liquidity becoming scarce, Bitcoin could potentially experience a more optimistic quarter moving forward.
Bitcoin Sell-side Liquidity Dries Up
As an analyst, I’ve observed a significant decline in Bitcoin’s sell-side liquidity, which has plunged to levels not seen for several months. This contraction in accessible Bitcoin liquidity is evident when examining the Liquidity Inventory Ratio, a key indicator that gauges how long the current supply can sustain the demand.
By October 2024, the data suggested that the available Bitcoin supply could sustain demand for approximately 41 months. At present, though, it stands at roughly 6.6 months. Interestingly, during Bitcoin’s surges in the first and fourth quarters of 2024, there was a similar drop in sellers’ liquidity in the market, suggesting that these occurrences tend to align with busy trading periods.
Bitfinex experts have revealed that Bitcoin miners, a specific group of market players, are contributing to the decrease in available sell-side liquidity. Over the years, there has been noticeable selling pressure from miners during halving periods. This is due to these entities selling their stored Bitcoins to generate funds for upgrading their mining equipment and staying financially viable as the Bitcoin network reduces their block rewards by half.
Since April 2024, miners have decreased the pace at which they sell Bitcoin. The amount flowing into exchanges has dropped significantly, particularly from the beginning of 2025, suggesting a reduction in the number of Bitcoins being offloaded by them.
HODLing, Not Selling
As a researcher, I observed an uptick in miners transferring their Bitcoin to exchanges in November 2024, coinciding with a significant surge in BTC’s value after the conclusion of the U.S. presidential elections. However, the tempo of profit-taking by these miners has slowed down since then.
At the moment, Bitcoin miners find themselves making a profit, making it effortless for them to carry on with their operations. Interestingly, they tend to opt for holding onto their Bitcoins instead of selling them.
As a researcher examining the Net Unrealized Profit and Loss (NUPL), I’ve observed that it consistently hovers around 0.5 for miners. This indicates a robust position for miners, as they continue to hold substantial unrealized profits in Bitcoin. Bitfinex further emphasizes this trend, suggesting a preference among miners to keep their BTC at this juncture.
As I delve into the dynamics of the Bitcoin market, it’s interesting to note that not just the miners are choosing to hold onto their BTC; long-term investors are doing the same, a testament to their belief in its potential growth.
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2025-01-07 15:36