When Will BTC's Bull Run End? Liquid and Illiquid Supply

When Will BTC's Bull Run End? Liquid and Illiquid Supply


Bitcoin in total are 21 million and 88.5% have already been mined (18.6 million). About 3 million BTC have instead been lost forever (dead owner, lost private key, transactions on wrong addresses, BTC burned, etc).
Glassnode did an interesting study where it divided BTC's outstanding supply into three liquidity categories:

✅ Highly liquid (BTC deposited on exchanges)
✅ Liquid (something in between)
✅ Illiquid (Hodlers)

This classification methodology has suggested that currently 14.5 million BTC (78% of the outstanding Bitcoin supply) is held by illiquid entities.
Quantifying Bitcoin's liquidity is essential for understanding its market. If many Bitcoins are illiquid (deposited in private wallets), a supply crisis emerges, which weakens sales on the market.
A sustained rise in illiquid Bitcoins is an indication of strong investor hodling sentiment and a potential bullish signal.
Liquidity is therefore the extent to which an entity spends the assets it receives. Illiquid entities are those that accumulate coins in anticipation of a long-term BTC price appreciation (e.g. a Hodler who NEVER sells).
An example is given in the study: if an entity has spent 25% of all BTC received over its life, the amount it holds will contribute 50% to the liquid and 50% to the illiquid bucket.
For each address that holds BTC, an "L" parameter has been assigned to which a value from 0 to 1 has been assigned based on the movements of that entity that controls those BTCs.
The current state has been summarized in this graph:

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At the time of writing the numbers obtained from this study tell us that:
⚠️Illiquid supply: 14.5 million BTC (including 3 million lost)
⚠️Liquid supply: 1.2 million BTC
⚠️Highly liquid supply: 3 million BTC

This means that around 78% of Bitcoin's current supply is considered illiquid. Only 4.2 million BTC (22%) is currently in circulation and available for purchase and sale.
Looking at the change in supply in each category since the beginning of the year, we can see a clear upward trend in Bitcoin illiquidity (1 million BTC became illiquid in 2020). This indicates that the current bull market is driven by the staggering amount of illiquidity.

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Looking at the cumulative change in liquid BTC versus illiquid since 2017 we see that illiquid supply tends to decrease during bear markets and increase during bull markets (and vice versa for liquid supply).
Furthermore, the liquid part of the offer has been constantly decreasing for 9 months, decreasing its growth from 30% to 12% (measured in 2017).
We are currently in a phase where the illiquid supply is growing more than the total circulating supply. Something similar happened in the Bull Run at the end of 2017.
The study can be found here: Glass Node (Metrics)

 

We are 7.6 billion people in the world. What do you say 4.2 million BTC is enough for 7.6 billion people?

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