The Bitcoin market is currently experiencing a shift in liquidity dynamics.
Specifically:
– Liquidity supply (indicative of Bitcoin trading trends) has decreased to a record low of 1.295 million Bitcoin, the lowest level since 2012. This suggests that the circulating supply of Bitcoin is narrowing, potentially creating supply-demand tension in the market.
– Conversely, liquidity demand (indicative of Bitcoin holding trends) has reached an all-time high at 15.4 million BTC. This increase includes the addition of 50,000 BTC in the past month, continuing a pattern that began in July.
– High liquidity supply has also significantly decreased to 2.888 million Bitcoin, marking the lowest level since 2018 and highlighting the current tightening of liquidity in the market.
However, despite this tightening of supply, the price of Bitcoin reached its highest point in the last 18 months, hitting $37,980. Currently, BTC has corrected and is trading around $36,400.
Market sentiment is also reflected in Bitcoin wallet portfolios. According to data from Sentiment, over one and a half million new wallets holding less than 1 BTC each were created in the past month. This indicates that small-scale investors are actively accumulating BTC.
Meanwhile, wallets containing 1-100 BTC decreased by 18 addresses, and wallets holding over 100 BTC decreased by 19 addresses. The actions of these wallets suggest that larger investors are taking profits as the market recovers.
Despite the changes in wallet distribution and liquidity dynamics, on-chain data paints a positive picture with over 700,000 recent recorded transactions. Transaction fees have risen to $18.67 during the Ordinals boom.
*Liquidity refers to the ability to convert an asset into cash (buy/sell) without significantly affecting the market price of that asset. An asset with high liquidity can be sold quickly without a significant price drop. With other factors remaining constant, assets with high liquidity tend to trade at higher prices, while assets with low liquidity are often sold at a discount.