Bitcoin (BTC) has recently seen a significant shift in its supply dynamics, with the amount of “illiquid” Bitcoin reaching an all-time high. This trend, alongside a notable decline in Bitcoin held on exchanges, points to heightened investor demand and growing scarcity in the market.
Illiquid Bitcoin Reaches Record Levels
According to Glassnode data, around 14.8 million BTC are now considered “illiquid,” accounting for 75% of the total circulating supply. This refers to Bitcoin held by long-term holders (LTHs) who are not actively trading or selling their assets. Over the past 30 days, the illiquid supply has increased by over 185,000 BTC, marking the second-largest 30-day increase this year.
The continuous accumulation by long-term holders, especially since November 26, with more than 2,000 BTC added to their stacks, suggests that this cohort is less likely to sell in the short term. This shift could signal the end of profit-taking, reducing sell pressure in the market and potentially supporting price stability and future growth.
Bitcoin on Exchanges Nears Four-Year Low
Alongside the rise in illiquid Bitcoin, the amount of BTC held on exchanges has fallen sharply. Currently, less than 3 million BTC are available on exchanges, approaching a four-year low. This indicates that investors are withdrawing their Bitcoin from exchanges, which could point to a strong preference for holding rather than trading.
Over a five-year period, the amount of Bitcoin on exchanges has fluctuated within the range of 2.7 million to 3.3 million BTC. However, the recent trend of declining exchange balances is a positive sign, indicating that more investors are taking their Bitcoin off exchanges, a move typically associated with increased demand and long-term confidence in the asset.
The $100,000 Sell Wall and Growing Scarcity
One of the key barriers in Bitcoin’s price movement is the $100,000 sell wall, where around $384 million worth of BTC is available for sale between its current price and the six-figure milestone. This large sell wall poses a significant challenge for Bitcoin’s upward movement, but the supply data suggests growing pressure for an eventual breakout.
As 75% of Bitcoin supply is now classified as illiquid, the scarcity of available Bitcoin continues to rise. This tight supply, combined with increased investor demand, sets the stage for future upward price movements, potentially breaking through the $100,000 barrier.
Key Takeaways: Strong Demand and Tightening Supply
The data reveals that Bitcoin’s supply dynamics are becoming more constrained, with illiquid supply reaching new highs and Bitcoin on exchanges hitting multi-year lows. These trends suggest that long-term holders are confident in Bitcoin’s future and are less likely to sell in the short term. For Bitcoin to experience a more sustainable bull run, it will need to continue seeing outflows from exchanges, signaling continued investor appetite and reduced speculative activity.
As Andre Dragosch, Head of Research at Bitwise, stated, “Bitcoin’s illiquid supply continues to hit new all-time highs while exchange balances hit a multi-year low, further intensifying Bitcoin’s supply scarcity.” This tightening supply could lead to stronger price movements as demand grows.
