Bitcoin demand soars, with monthly figures jumping from 40,000 to 213,000 BTC, driven by increased accumulation. US ETFs excluding GBTC have contributed to this surge in demand, with their BTC balances growing significantly. Bitcoin liquidity has reached all-time lows, and the current sell-side liquidity is estimated to be bullish for BTC prices.
Bitcoin is facing a severe liquidity crisis as demand for the digital currency soars to unprecedented levels.
According to CryptoQuant analysts, monthly demand has skyrocketed from 40,000 BTC at the beginning of the year to a staggering 213,000 BTC today. This increase is attributed to the increasing total accumulation address balance, indicating increased investor interest in securing Bitcoin.
Bitcoin Liquidity Crisis Hits Crypto Market, CryptoQuant Says
Bitcoin exchange-traded funds (ETFs) in the United States contribute significantly to the increase in demand for BTC. These ETFs, excluding GBTC, have seen their BTC balances increase dramatically. In fact, from February 25 to March 17, their balances went from 117,000 to 185,000 BTC. This trend reflects the crucial role that institutional investments through spot ETFs are playing in amplifying demand for Bitcoin.
Additionally, the appetite for Bitcoin among large holders, or “whales,” is also experiencing a parabolic rise. The year-over-year growth of the total balance of Bitcoin whales – those holding between 1,000 and 10,000 BTC – has reached an all-time high of 1.57 million BTC, marking a significant acceleration from 874,000 BTC at the beginning of 2024.
At the same time, Bitcoin sell-side liquidity is experiencing a downward trend. The total visible amount of Bitcoin on key entities has dropped to 2.7 million BTC. This marks a sharp decline from the all-time high of 3.5 million BTC reached in March 2020.
Record Demand for Bitcoin (BTC) According to CryptoQuant
The imbalance between record demand and dwindling seller liquidity has led to an all-time low in liquid Bitcoin inventory. Estimates suggest that sellers’ current liquidity can only meet growing demand over the next twelve months, assuming demand from accumulation directions.
This situation becomes even more critical when taking into account the delisting of Bitcoin from exchanges outside the United States, reducing liquid inventory to just six months of demand. This exclusion is based on the premise that US Bitcoin Spot ETFs primarily source Bitcoin from within the country:
“Record demand for Bitcoin, coupled with declining seller liquidity, has caused liquid Bitcoin inventory to plummet to its lowest level in terms of months of demand… Declining liquid inventory would support higher prices.”
The convergence of these factors points to a bullish future for the price of Bitcoin. In fact, Ki Young Ju, CEO of CryptoQuant, added that in these conditions corrections imply things. For example, prices “imply a maximum drawdown of around 30% in bull markets, with a maximum pain of $51,000.”
On March 22, CryptoQuant’s CEO posted the following on X:
“Bitcoin spot ETF net flows are slowing. Demand may rebound if the $BTC price approaches critical support levels. New whales, mainly ETF buyers, have a $56K on-chain cost basis. Corrections typically entail a max drawdown of around 30% in bull markets, with a max pain of $51K.”
Bitcoin Halving Coming Soon
The upcoming bitcoin halving event is a major driver that is expected to boost the price of BTC, ushering in a parabolic uptrend.
With approximately 4,450 blocks left, the estimated time remaining would see the fourth bitcoin halving take place on April 20, which would reduce mining block rewards by 50% from 6.25 BTC to 3.125 BTC.
By Audy Castaneda
