Bitcoin Faces Potential Sell-Side Liquidity Crisis Amid Unprecedented Demand

According to CryptoPotato, there is a very high chance that Bitcoin will face a liquidity crisis on the sell side in the next few months as demand for the digital asset rises to unprecedented levels. Analysts expect the current Bitcoin sell-side liquidity inventory to meet demand for six to twelve months. Conversely, a decline in liquid stock could push the price of Bitcoin (BTC) northward.

Monthly demand for Bitcoin has increased from 40,000 BTC at the beginning of 2024 to 213,000 BTC at the time of writing. CryptoQuant measures demand solely by the 30-day growth in the total balance of accumulation addresses receiving and holding BTC. The dramatic increase in BTC demand is due to other large holders of Bitcoin such as exchange-traded funds (ETFs) and whales in the US. Whales currently holds approximately 1.57 million BTC; This is a significant increase from the 874,000 BTC recorded at the beginning of 2024.

While demand is rising, sell-side liquidity continues to decrease. The amount of BTC in sell-side liquidity units is hovering around 2.7 million BTC, down from the all-time high of 3.5 million BTC recorded in March 2020. As Bitcoin demand soared and sell-side liquidity decreased, Bitcoin's liquid inventory plummeted. It fell to its lowest level ever in terms of monthly demand. Removing BTC from non-US CEXs will further reduce Bitcoin liquid inventory to six months, as US spot ETFs will only source BTC from local entities.

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