Bitcoin has likely weathered the worst of its short-term bearish pressure, as the cryptocurrency has seen a sharp decline in sellers on exchanges, according to cryptocurrency analysts.
“Bitcoin sell-side liquidity is declining at an accelerated pace,” Bitfinex analysts said in a Jan. 6 market report.
Declining Liquidity Inventory Ratio Bullish for Bitcoiners
The analysts explained that Bitcoin’s liquidity inventory ratio
BTC
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€92,634
—which measures how long the current supply of Bitcoin can meet demand on exchanges—has fallen from 41 months in October 2024 to just over 6.5 months.
This is bullish for cryptocurrency traders, as a limited supply creates the perception of a scarcity effect for the asset, which typically drives prices higher.
“This significant decline aligns with the spikes seen in both Q1 and Q4 2024, indicating a tightening of available liquidity during periods of strong market activity,” Bitfinex analysts said.