According to CryptoPotato, the chances of Bitcoin facing a sell-side liquidity crisis in the next few months are very high due to demand for the digital asset soaring to unprecedented levels. Analysts expect the present Bitcoin sell-side liquidity inventory to cover demand for six to twelve months. Conversely, a plunge in liquid inventory could pull Bitcoin’s (BTC) price northward.
Monthly demand for Bitcoin has risen from 40,000 BTC at the start of 2024 to 213,000 BTC at writing time. CryptoQuant measures the demand by the 30-day growth in the total balance of accumulation addresses – those that only receive and hold BTC. The dramatic rise of BTC demand is driven by Bitcoin exchange-traded funds (ETFs) in the United States and other large holders, like whales. Whales now hold roughly 1.57 million BTC, a significant increase from 874,000 BTC recorded at the beginning of 2024.
While demand soars, sell-side liquidity continues to decline. The amount of BTC at sell-side liquidity entities hovers around 2.7 million BTC, down from an all-time high of 3.5 million BTC recorded in March 2020. With Bitcoin demand skyrocketing and sell-side liquidity falling, the liquid inventory of Bitcoin has plummeted to its lowest ever in terms of monthly demand. Removing the BTC on CEXs outside the U.S. would further reduce the Bitcoin liquid inventory to six months, as U.S. spot ETFs would only source BTC from local entities.