- Bitcoin liquid supply has declined to its lowest level since 2012, indicating diminishing active trading volume
- Illiquid supply of Bitcoin is surging to new highs, suggesting growing conviction among long-term holders to retain their coins
- Highly liquid Bitcoin supply has also contracted to a multi-year low, pointing to an overall decrease in market liquidity and shift towards holding over trading
The Bitcoin market is currently undergoing an interesting phase of liquidity transformation. Supply dynamics indicate growing conviction among long-term holders even as active trading dwindles.
Diminishing Liquid Supply
The liquid supply, representing the traded Bitcoin, has declined to 1.295 million BTC – the lowest level since 2012. This shrinking pool of Bitcoin under active circulation can potentially create supply-demand tension.
Surging Illiquid Supply
On the flip side, the illiquid supply, defined as Bitcoin with minimal spending history, is rising steadily. It registered a new peak of 15.4 million BTC. In the past 30 days alone, illiquid entities expanded by 50,000 BTC, a pattern that started in July. This uptrend implies growing holder sentiment – more Bitcoin holders are retaining their assets, reducing circulation.
Contracting Highly Liquid Supply
Similarly, the highly liquid supply, denoting Bitcoin readily available for transactions, has also contracted to around 2.888 million BTC – its lowest since 2018. Hence, the overall liquidity in the Bitcoin market appears to be shrinking, signalling an increasing trend of holding over trading.
The data shows the Bitcoin market liquidity is transforming with more coins being held long-term. This may lead to supply-demand imbalances as active trading declines. If the trend persists, it can have significant price implications in the future.