This 2020, the liquidity of bitcoin in the market has constantly decreased.
Glassnode identifies illiquidity as a determining factor for bitcoin.
After breaking its all-time price high, momentarily surpassing $ 28,500, bitcoin (BTC) could have an even more promising future in the market. This is indicated by the small amount of bitcoins actually available in the market, according to the most recent report from Glassnode.
Only 22% of the bitcoins in existence would actually be part of the market, while more and more big investors cling to cryptocurrency as store of value, notes at the company. In his calculations, those constantly moving BTCs are just 4.8 out of the more than 18.5 million in existence.
For the researchers, “a sustained increase in illiquid bitcoins (not available for sale) is an indication of a strong sentiment of investor confusion and a potential bullish signal.” In other words, the lower the supply of coins in the market, the more expensive it is to obtain them.
Sus BTC [el de los hodlers o inversionistas a largo plazo] they are practically eliminated from the liquid part of the bitcoins that are in circulation and accessible for trade. In contrast, exchanges with constant inflows and outflows contribute directly to the liquidity supply pool.
An example of this behavior is the investment attitude of MicroStrategy, which continued to buy despite the rise in the price of bitcoin. Total, the company’s bitcoin purchases were made at an average price of $ 21,925 Of which, it should be noted, they already have an increase of more than 25% currently.
Glassnode has calculated the liquidity of an entity that owns bitcoin based on the movements it has made of the coins it received throughout its existence, whether they belong to exchanges, companies or other types of organizations. To do this, they are based on the relationship between inputs and outputs of addresses over time, with an index ranging from 0 to 1.
If the liquidity factor is less than 0.25, the entity is considered illiquid. Between 0.25 and 0.75 is liquid, while they consider as highly liquid an entity with a factor of 0.75. From their calculations, they exclude internal movements, that is, transactions between addresses controlled by the same entity, since they do not contribute to market liquidity.
Bullish future on the horizon of the bitcoin market
Reviewing the behavior of liquidity during this year, the researchers identified that During the last months, the amount of bitcoins in movement has been decreasing. More and more entities are not willing to sell their BTC. “This indicates that the current bull market is driven by the staggering amount of illiquidity,” the report notes.
The BTC holding behavior currently being experienced it’s been a trend of bull markets, Glassnode points out. This was identified in the year 2017, the year of the largest bull run to date, which took the price to the already exceeded historical maximum of $ 20,000 per bitcoin.
We are currently in a stage in which the illiquid supply grows more than the total circulating supply. A pattern we have similarly observed during the 2017 bull run.
“Illiquid supply tends to decline during bear markets and increases during bull markets (and vice versa for liquid supply),” the report adds. For this reason, the research concludes that In the absence of moving BTC, the future looks even more bullish for the price of the cryptocurrency.
As the trend has been increasing throughout 2020, the scenario “paints a potential bullish picture for Bitcoin in the coming months, as there is less BTC available on the network to buy,” the report adds.
As of this writing, the price of bitcoin is flirting with $ 28,000 again. And just like reported CriptoNoticias, bullish sentiment prevails with an eye toward $ 30,000, a new psychological high after the rupture up from 20,000 just a couple of weeks ago.