Bitcoin Supply Shortage Looms Amidst Skyrocketing Demand

Bitcoin is facing a potential supply crisis, as demand surges and sell-side liquidity dwindles, according to CryptoQuant's latest report. With the introduction of spot Bitcoin ETFs in the US, the demand for Bitcoin has increased significantly. Meanwhile, the supply of available Bitcoin is decreasing, resulting in a looming "sell-side liquidity crisis."

Bitcoin Faces Looming Supply Crunch Amidst Skyrocketing Demand

According to a recent analysis published in CryptoQuant's "Weekly Crypto Report" on March 26, Bitcoin is on the cusp of a significant supply shortage. The report highlights an impending "sell-side liquidity crisis" as demand for the cryptocurrency surges, primarily driven by the introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States.

The convergence of heightened demand and diminishing supply signals a pivotal shift in Bitcoin's market dynamics, with the potential to irreversibly alter its supply landscape by the early months of 2025.

CryptoQuant's report exposes the stark reality of Bitcoin's dwindling sell-side liquidity. "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," the platform observes. It estimates that the current sell-side liquidity inventory can only satisfy the growing demand for approximately twelve months.

The analysis focuses exclusively on "accumulating addresses," which represent wallets that have not engaged in any outbound transactions, implying that actual demand may be even higher. "This is only considering demand from accumulating addresses, which may be considered as the lower-end of Bitcoin demand," CryptoQuant elaborates.

When examining Bitcoin's availability solely on United States exchanges, the time frame during which supply can meet demand is significantly reduced. "The Bitcoin liquid inventory drops to six months of demand if we exclude the Bitcoin on exchanges outside the US," the report notes. "We exclude these exchanges considering that US spot Bitcoin ETFs will only source Bitcoin from US entities."

Ki Young Ju, CEO of CryptoQuant, shared his insights on the emerging sell-side liquidity crisis via a tweet on X (formerly Twitter). He highlighted the unexpected activity of Bitcoins mined in 2010 that have remained dormant since then, which are now being transferred to new wallet addresses.

Ju has been a staunch advocate of the ETF supply squeeze theory, previously predicting a six-month window in mid-March as ETF inflows surged to record levels. Despite a brief period of net outflows from these products, recent trends indicate a reversal, with the latest data from UK investment firm Farside indicating significant net inflows of $400 million on March 25—the largest in two weeks.

This data underscores the growing investor interest in Bitcoin, despite the tightening supply, signaling a potentially transformative period for its market dynamics. To submit a crypto press release (PR), send an email to [email protected].

Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial advice. Crypto investments are subject to high market risk, and investors should always conduct their own due diligence before making any decisions.

Investment Disclaimer: The content of this article is not intended to be a source of investment advice. The information provided is solely for informational purposes and should not be considered as a recommendation to buy or sell any cryptocurrency. Investing in cryptocurrencies involves significant risk and volatility, and investors should always conduct their own research before making any investment decisions.