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78% of Bitcoin’s supply is illiquid, Glassnode estimates. In other words, the number of Bitcoins actually available for purchase and sale is now very low. But for cryptocurrency holders, this is not a disadvantage.
The number of Bitcoins is not unlimited. It is even already determined with a limit set at 21 million. Today, 88.5% of the total Bitcoin supply has been mined. As a result, the number of tokens in circulation is approximately 18.6 million.
However, about 3 million of these tokens would no longer be accessible – for example because the secret key is lost. In addition, Glassnode estimates the number of Bitcoin held by “illiquid entities” at 14.5 million, or 78% of them.
In short, these Bitcoins are “hard to buy”. And this trend is expected to continue. Cryptocurrencies are becoming more and more important as a store of value. Investors, including institutional investors, are choosing to hold on to their assets.
Bitcoin then acts as a safe haven for storing wealth. But the consequence is fewer tokens available for sale and purchase for new buyers. This also has advantages.
“If many Bitcoins are illiquid, a supply crisis arises – and this has the effect of weakening the pressure to sell BTC on the market,” says Glassnode. A drop in the liquidity of crypto-active BTC reflects investor interest, but also “a potential bullish signal”.
According to its calculations, the firm estimates that there are 14.5 million illiquid TCBs. And only 4.2 million tokens fall into the liquid and very liquid categories. This represents only 22% of the existing Bitcoin.
Translation: “Only 4.2 million BTC (22%) are currently in constant circulation and available for purchase and sale”. But this study also demonstrates the increasing illiquidity of Bitcoin. In fact, more than one million BTCs have become illiquid by 2020.
“We can see a clear upward trend in the illiquidity of Bitcoin. This indicates that the current bull market is being fueled by the staggering amount of illiquidity,” Glassnode said.