Journalist
Posted:
- BTC’s foreign exchange reserves at the time of writing were 36% lower than 2020 highs.
- Growing institutional adoption could further erode the supply of liquids.
Bitcoins [BTC] Liquidity supply has fallen to new depths, thanks to the strengthening store of value story and expectations of a strong bull market in 2024.
Exchange supply has indeed moved downward in 2023, despite BTC prices more than doubling year-over-year (YTD), as shown by AMBCrypto’s analysis of CryptoQuant data.
Furthermore, at the time of writing, BTC’s foreign exchange reserves were 36% lower than 2020 highs.
Source: CryptoQuant
Demand >> Offer
A CryptoQuant researcher argued that the continued decline in currency supply was due to demand exceeding supply for Bitcoin. The analyst with the pseudonym ‘PAPI’ added:
“Higher emissions and lower demand in the first decade caused supply to rise. I consider 2018 the last ‘early’ cycle. In 2020>2021 the cat was out of the bag. Remember all the Superbowl ads? Since then, demand has exceeded supply and Bitcoin has finally (really) entered popular culture.”
This claim was also reflected in greater use of the Bitcoin blockchain. The 30-day average of daily transactions increased dramatically in 2023, a sign of increasing mainstream adoption.
Source: CryptoQuant
Spot ETFs to further reduce liquid supply?
The analyst also predicted a supply shortage due to greater market penetration by institutional giants. The argument was valuable in light of the expected approvals of several BTC spot ETF applications.
Unlike some other funds, a spot ETF involves holding Bitcoin as the underlying asset. It is clear that asset managers will have to buy a lot of Bitcoins to keep the share price equal to the real-time value of the cryptocurrency.
As a result, a large part of the offer will once again become off-limits to the general public. Add to that the quarterly halving events, which will limit Bitcoin’s access to the market anyway. All these factors could potentially enable sustainable, scarcity-driven growth for the king coin.
Cryptoquant analyst PAPI opined:
“At the current rate, even if ETFs don’t accelerate the decline in stock market supply, we will still be heading towards near zero within a decade. “
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Traders are still greedy
Bitcoin fell down $37,000 over the past 24 hours, as profit-hungry traders put selling pressure on the market.
Market sentiment was still greed-oriented, indicating good upside potential in the short term.