Understanding Bitcoin Liquidity
Bitcoin is like that last piece of cake at a party; the fewer pieces left, the more valuable they seem. Analysts at Glassnode point out that the amount of BTC received and spent is on the decline. In layman’s terms, fewer people are passing around the proverbial cake plate, causing liquidity to dry up faster than your uncle’s jokes at Thanksgiving.
The Impact of Low Liquidity
When Bitcoin’s liquidity takes a hit, it means there’s less BTC floating around for buying and selling. Imagine trying to score a ride-share during a concert’s encore—good luck finding availability! As BTC becomes scarcer in the market, it’s expected to increase in value. The current low liquidity vibe suggests that Bitcoin might be gearing up for one hell of a bull run.
A Growing Institutional Appetite
Throughout 2020, institutional investors have been hoarding Bitcoin like a squirrel with its nuts before winter. High-profile figures, including Paul Tudor Jones, have been eyeing BTC as a hedge against inflation. It all started with MicroStrategy’s jaw-dropping $425 million investment, and others like PayPal and Square joined the party soon after, proving that Bitcoin isn’t just for those with gamer tags anymore.
Illiquid Bitcoin: What it Means for You
According to Glassnode, a whopping 4.2 million BTC is currently available for trading, while approximately 14.5 million BTC is classified as illiquid. If you’re wondering how that affects you, just think of it this way: the Bitcoin you want might just be hiding under the mattress of a long-term holder. In the past year, about $27.8 billion worth of Bitcoin has become illiquid. Those long-time holders are all about that “HODL” life, dishing out fewer BTC into circulation.
The Miner Factor
As if the Bitcoin saga needed another twist, miners are facing a shortage of ASIC hardware. Kyle Davies from Three Arrows Capital explained that without new machinery, miners tend to sell just enough BTC to cover their expenses instead of amassing more. This could mean fewer BTC entering the marketplace, as miners resist selling their precious digital gold. One less piece of the pie for you and me, but it could further drive BTC prices into the stratosphere!
Conclusion: Buckle Up!
With this perfect storm of limited liquidity, increasing institutional interest, and miners hesitant to sell, we might be in for a wild ride as we head into 2021. If you’re thinking about buying Bitcoin, make sure you’re prepared for the trek to that last piece of cake—it just might be harder to get than you think!
