In-Depth Analysis of Bitcoin Liquidity Trends
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Examining Bitcoin Liquidity: A Crucial Market Indicator
The recent analysis by blockchain intelligence firm Glassnode sheds light on Bitcoin’s liquidity status amid fluctuating market conditions. Following a significant price increase to $126,000, Bitcoin experienced a notable correction, dropping below $105,000. While the cryptocurrency has managed some recovery, it continues to face resistance at $115,000, marking a modest 0.47% gain for the month.
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Understanding the Shift in Bitcoin’s Illiquid Supply
On October 25, Glassnode highlighted that Bitcoin’s illiquid supply decreased by 62,000 BTC since mid-October. Illiquid Bitcoin represents tokens held in wallets with minimal selling activity. These coins are generally considered off-market due to their holders’ reluctance to sell. Therefore, a reduction in illiquid BTC signals an increase in market supply as more coins become available for trade. This can complicate price growth unless there is a corresponding increase in demand.
Historically, the rise in illiquid supply has positively influenced market cycles before the recent downturn. Past instances, such as the 400,000 BTC drop in January 2024, have demonstrated how increased circulation can dampen market momentum.
Identifying the Source of Increased Bitcoin Supply
Further analysis by Glassnode reveals intensified accumulation by Bitcoin whales, who have bolstered their holdings over the past 30 days without significant liquidations since October 15. In contrast, the surge in liquidity has primarily been driven by retail investors. Wallets containing between 0.1 and 10 BTC, valued from $10,000 to $1,000,000, have shown consistent outflows, significantly reducing their BTC holdings since November 2024.
Glassnode analysts point out that momentum traders, mainly retail participants, are progressively exiting the market. Although large-scale buyers, or whales, have increased their activity, their demand has not sufficed to absorb the excess supply, resulting in the current price equilibrium state.
Currently, Bitcoin trades at $111,570, representing a 0.89% uptick over the last 24 hours. Over more extended periods, Bitcoin has achieved a 4.11% rise in the past week and a slight 0.05% increase over the previous month.
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