Key Points
- A “sell-side liquidity crisis” is developing in the Bitcoin market, according to recent research.
- Due to increasing demand, the supply of Bitcoin may be insufficient by Q1 2025.
Bitcoin Demand Outstripping Supply
Bitcoin (BTC) is facing a potential supply shortage as demand continues to surge. This information comes from a recent report by on-chain analytics platform CryptoQuant.
The report, released on March 26, highlights an impending “sell-side liquidity crisis” in the Bitcoin market.
US Spot Bitcoin ETFs Drive Demand
The demand for Bitcoin has soared this year, largely driven by the introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States.
CryptoQuant suggests that this constant demand is beginning to impact the Bitcoin market. The platform predicts that if the current demand growth rate continues, the supply dynamics of Bitcoin may change permanently by the first quarter of 2025.
The report states, “Record Bitcoin demand paired with declining sell-side liquidity has resulted in the liquid inventory of Bitcoin plunging to the lowest ever in terms of months of demand.”
CryptoQuant’s analysis only considers “accumulating addresses,” or addresses with no outbound transactions, indicating that actual demand may be even higher.
Bitcoin Supply on US Exchanges
When considering only the Bitcoin available on US exchanges, the supply can meet the demand for half as long.
The report explains, “The Bitcoin liquid inventory drops to six months of demand if we exclude the Bitcoin on exchanges outside the US. We exclude these exchanges considering that US spot Bitcoin ETFs will only source Bitcoin from US entities.”
Old Bitcoin Supply ‘Waking Up’
CryptoQuant CEO Ki Young Ju noted that the sell-side liquidity crisis is causing old Bitcoin supplies to “wake up.”
He was referring to data showing coins mined in 2010 and dormant since suddenly moving to a newly-created wallet address.
Ki has previously highlighted the supply squeeze caused by ETFs, predicting a six-month run in mid-March as ETF inflows broke records.
However, the past week has seen a contrasting trend of consecutive net outflows from these products, a trend that now appears to be reversing.
Latest data from UK-based investment firm Farside shows net inflows of $400 million for March 25 — the most in two weeks.
