In the past few days, Bitcoin prices are surging, but the Bitcoin investors are regularly locking up their BTC for the long-term. In the last 30 days, nearly 270,000 BTC is taken out of liquid supply.
For the last nine months, Bitcoin’s (BTC) liquid supply has consistently fallen. Whereas the liquid supply is currently at 21.3% and there are no signs of reversing. This increasing illiquid supply of Bitcoin can be bullish for its price. It is because the new retail and traditional traders are competing for a diminishing supply. As per Glassnode, nearly 80% of 18.6 million circulating Bitcoin are stored in illiquid wallets.
According to Glassnode, a Bitcoin wallet is illiquid if less than 25% of the Bitcoin received is transferred out across the entity’s life. Conversely, to be considered highly liquid, the majority of Bitcoins must be transferred back into circulation with less than 25% of the inflows held onto.
Out of 3.9 million highly liquid BTC, Glassnode considers 61% or 2.38 million is held by centralized exchanges. Their balances are also dropping as the data from CryptoQuant, an analytics firm indicates that exchanges’ reserves have reduced by 13.8% since July.
Increased institutional adoption may be the reason for the depletion of Bitcoin’s liquid supply. The wallet tracking service, Bitcoin Treasuries, estimates that 33 institutional entities have accumulated more than 1.2 million BTC or 6.5% of Bitcoin’s circulating supply.
As of January 20, 2021, Grayscale, increased its holdings by 25,000 BTC with a portfolio of 641,523.7 BTC. Hence, 900 Bitcoin are minted every day. As per Glassnode, on average, only one-third of those are being sent to exchanges since July 2020.
The data from SwissBorg shows that in the second half of 2020, institutional investors have purchased more than 230% of the newly minted BTC. Combining the purchases of PayPal and Square, demand could increase to 500% of the new supply.
Yesterday, BlackRock filed with the SEC that listing Bitcoin Derivatives will be a possible investment. The organization entered the new year 2021 with $7.81 trillion in assets under management. It is more than seven times crypto’s entire market cap.