Bitcoin's (BTC) liquid supply is shrinking as more coins are being stowed away in what's known as 'illiquid wallets'. These are wallets controlled by entities with minimal spending history, suggesting a trend of accumulation by long-term investors.
Over the past month, a whopping 147,351.58 BTC ($3.9 billion) became illiquid, the highest since December of the previous year. The total Bitcoin held by illiquid entities has soared to a record 15,207,843 BTC.
Recent data from Glassnode, a blockchain analytics firm, indicates a noticeable downward trend in the highly liquid supply, currently near a cycle low of 2.94M BTC, a decrease of 620K BTC since January 2022.
This escalating trend of illiquidity suggests a contraction in the actively tradable supply of Bitcoin, resulting in both a decline in liquidity and a constrained supply side. Despite the ongoing macroeconomic uncertainty and increased regulatory risks, investors remain confident about Bitcoin's price prospects.
Interestingly, this increasing illiquidity is not a sign of investor fear or uncertainty. On the contrary, it signals a steady and gradual accumulation of BTC. This holds true even as the market grapples with continued macroeconomic uncertainty and increased regulatory risks, such as lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against digital asset exchanges Coinbase and Binance.
"Overall, the market appears to be in a period of quiet accumulation, which suggests an undercurrent of demand, despite the regulatory headwinds of late.", James Check, an analyst at Glassnode, noted in a recent report.
This decline in liquidity, coupled with a constrained supply side, underscores the growing demand for Bitcoin amid a landscape that is seeing an increasing rotation of money out of altcoins and into the leading cryptocurrency by market value.
This trend mirrors patterns seen after Luna's collapse and signifies a significant contraction in the actively tradeable supply of Bitcoin.
The undercurrent of quiet accumulation shows that, despite external factors, the faith in Bitcoin's long-term value proposition remains strong among investors.
