Bitcoin Liquidity Is Reducing as Institutions Acquire more BTC

News / 05.01.2021

Bitcoin liquidity has reduced in recent weeks following the bullish rise of the leading currency. This phenomenon can be linked to the growing number of institutions that have purchased BTC in recent months.

Bitcoin (BTC) Is Experiencing a Liquidity Crisis

According to a recent report from analytical firm Glassnode, Bitcoin liquidity has plunged in recent months. That is to say, the availability of buying and selling assets has reduced according to on-chain data.

As shown in the graph above, the highly liquid supply has been in free fall since January 2020. Simultaneously, the non-liquid supply, which is technically bitcoins in external wallets, is on the rise.

According to Glassnode, this trend is rather positive when it comes to future movements in the price of BTC. The report hints that it is a sign of a major bullish run since scarcity leads to an increase in demand. This subsequently leads to an increase in price as more investors look to buy the coin.

Glassnode also noted that new investors tended to hold onto their bitcoins rather than making gains. This suggests that there is still room for the price of Bitcoin to increase to record levels.

Institutional Demand On The Rise

As expected, Institutional demand is the major reason behind the fall in the liquidity of Bitcoin. More traditional financial firms accumulate Bitcoin at a massive rate leading to more coins leaving exchanges to private wallets.

Fortune 500 companies like MassMutual have turned their sights towards bitcoins making huge purchases in recent months. This is in addition to existing investment firms like Grayscale and MicroStrategy, which manage huge BTC portfolios.

Recently the CEO of Bitwise, Hunter Horsley, alluded to the fact that professional investors are moving into crypto assets. “The speed at which professional investors are moving into cryptocurrencies right now is remarkable’’. He said.

Bitcoin Price Stabilizes Above $30,000

After hitting a new all-time high of $34,684 two days ago, the price of BTC underwent a sharp correction yesterday. In a flash crash, BTC dipped below $28,000, leading to huge losses for traders on popular exchanges.

However, as of today, the price of Bitcoin has managed to stabilize above $30,000. The leading currency is valued at $31,685, and there are expectations that it could test the $35k mark in the coming days.

Olowoporoku Adeniyi is a blockchain enthusiast and crypto evangelist. Currently he loves all things crypto and covers happenings within the blockchain space.