Highly illiquid assets are known for their high price volatility, and Bitcoin’s supply is no exception. These “locked-up” bitcoins have the potential to drastically affect Bitcoin prices in the long run.
The “when will bitcoin run out” is a question that is asked often. The answer to this question is 3/4 of the bitcoin supply now illiquid.
Since the beginning of the year, bitcoin markets have been stabilizing, but on-chain measures are presenting a more bullish image as more of the commodity becomes illiquid.
In its weekly report on Jan. 3, on-chain analytics service Glassnode delved into Bitcoin supply data to obtain a clearer understanding of the longer-term macro patterns.
Despite the fact that the asset has been trading sideways so far this year, more BTC has been illiquid, according to the data. Illiquid supply growth has accelerated, with illiquid supply currently accounting for more than three quarters (76%) of total circulating supply.
Illiquidity, according to Glassnode, occurs when BTC is sent to a wallet with no previous spending history. BTC in liquid supply, which accounts for 24% of the total, is held in wallets that routinely spend or trade, such as exchanges and hot wallets.
“We can observe that, even when prices stabilized in the last months of 2021, there was an acceleration of coins from liquid to illiquid wallets.”
According to the data, more Bitcoin is being placed into storage, suggesting a rise in hodling and accumulating behaviors. The drop in highly liquid supply also suggests that a large selloff or capitulation event is unlikely to occur very soon.
BTC supply, liquid and illiquid, as a percentage of total: Glassnode
These situations, according to the researchers, show “divergence between what seems to be bullish on-chain supply dynamics and bearish-to-neutral price behavior.”
There are just 1.3 million Bitcoins remaining in circulation on cryptocurrency exchanges.
Glassnode indicated in the same study that the total supply owned by long-term investors has reached a plateau in the last month or so. This indicates that long-term investors have ceased spending or selling coins and have turned into hodlers or even accumulators. It stated, “This presents another positive interpretation of market belief.”
Long-term investors now own 13.35 million BTC, down only 1.1 percent from October’s peak of 13.5 million coins. Long-term holders (LTH) are defined by Glassnode as wallets or accounts that have held Bitcoin for more than 155 days.
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