Bitcoin Liquidity Crisis
Throughout 2020, more and more investors and institutions adopted Bitcoin, some of the reasons for them being because Bitcoin has a fixed amount of supply. There are also concerns that there will be inflation and an increase in central bank liquidity, so that investors and institutions adopt Bitcoin as a hedge against inflation. Glassnode's research found that only about 4.2 million BTC were in circulation and tradeable.
Bitcoin liquidity is defined as the average ratio of BTC earned and spent across all entities. According to Coinmarketcap the current Circulating Supply is 18,592,612 BTC, and illiquid Bitcoin amounts to 14.4 million BTC, so the remaining around 4.2 million BTC in constant circulation is available for trading.
More and more long-term investors are holding onto their Bitcoin, refraining from wanting to sell their asset. If old holders continue to move away from wanting to sell BTC, this dominant cryptocurrency will become rarer and harder to accumulate.
Trends like these could push the Bitcoin price higher in the long run. Triggering an ongoing bullish cycle. Meanwhile, analysts say that during 2020, a total of 1 million BTC was added to become illiquid, the more investors will decline. This is bullish, and shows that the current increase is already due to the Bitcoin liquidity crisis that occurred.
Throughout 2020, more and more investors and institutions adopted Bitcoin, some of the reasons for them being because Bitcoin has a fixed amount of supply. There are also concerns that there will be inflation and an increase in central bank liquidity, so that investors and institutions adopt Bitcoin as a hedge against inflation. Glassnode's research found that only about 4.2 million BTC were in circulation and tradeable.
Bitcoin liquidity is defined as the average ratio of BTC earned and spent across all entities. According to Coinmarketcap the current Circulating Supply is 18,592,612 BTC, and illiquid Bitcoin amounts to 14.4 million BTC, so the remaining around 4.2 million BTC in constant circulation is available for trading.
More and more long-term investors are holding onto their Bitcoin, refraining from wanting to sell their asset. If old holders continue to move away from wanting to sell BTC, this dominant cryptocurrency will become rarer and harder to accumulate.
Trends like these could push the Bitcoin price higher in the long run. Triggering an ongoing bullish cycle. Meanwhile, analysts say that during 2020, a total of 1 million BTC was added to become illiquid, the more investors will decline. This is bullish, and shows that the current increase is already due to the Bitcoin liquidity crisis that occurred.