On-chain data shows that bitcoin's illiquid supply has recently skyrocketed to a new all-time high (ATH). Here's what this could mean for the asset.
Around 74% of bitcoin's circulating supply is currently “ilquiquid”
in a newx.com/btcjvs/status/1845486362855616813″ target=”_blank” rel=”noopener nofollow”> mail In x, analyst James Van Straten analyzed the latest trend in bitcoin's illiquid supply. The concept of 'liquidity' for bitcoin comes from on-chain analytics firm Glassnode, which defines it for an entity as “the ratio of outflows and inflows accumulated over the lifetime of the entity.”
An “entity” here refers to a collection of addresses that Glassnode has determined belong to the same investor. Based on the value of this metric, entities can be classified into one of three categories: illiquid, liquid, and very liquid. Entities with a history of high inflows but low outflows are included in the Illiquid category. More formally, the value of the indicator must be less than 0.25 for the majority of an investor's holdings to be considered part of the illiquid supply.
At the other end of the spectrum is the High Liquidity Supply, made up of the balance of entities that have their liquidity ratio greater than 0.75 (that is, those with outflows similar to inflows). The illiquid supply essentially represents the frozen portion of the btc supply that is unlikely to move in the near future as it is locked in the wallets of investors who have little sales history. In contrast, highly liquid supply corresponds to tokens that are constantly moving.
Between the two is the liquid supply, which contains entities that engage in a varying degree of trading activity (liquidity ratio greater than 0.25 and less than 0.75).
Note that the methodology the analytics firm employs means there are no abrupt changes in categories at the boundaries; The transition between supply occurs smoothly (for example, an entity with a liquidity ratio exactly equal to 0.25 contributes 50% to Illiquid and 50% to Liquid).
Now, here is the chart shared by Van Straten showing the trends in illiquid and liquid + highly liquid supplies for bitcoin:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/10/Bitcoin-39Illiquid39-Supply-Sets-New-147-Million-ATH-What-It.jpeg" alt="bitcoin liquidity” width=”1800″ height=”1013″/>
The two metrics appear to have been going opposite ways in recent months | Source: x.com/btcjvs/status/1845486362855616813/photo/1" target="_blank" rel="noopener nofollow">@btcjvs on x
As can be seen in the chart above, the illiquid supply of bitcoin has been increasing since the first months of the year, implying that diamond hands have been buying coins. Following the latest continuation of the rise, the metric has established a new ATH of around 14.7 million, which is equivalent to around 74% of the entire btc supply in circulation.
“The fascinating thing is that the divergence continues to grow between illiquid, liquid and very liquid,” says the analyst. “Available trading supply continues to decline while market sentiment continues to favor HODLing.”
btc Price
At the time of writing, bitcoin is trading at around $64,900, up more than 3% over the past week.
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Looks like the price of the coin has gone through some recovery recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, Glassnode.com, chart from TradingView.com
