Bitcoin Liquidity Squeeze: Supply Decreases as Wallet Distribution Shifts
The highly liquid supply of Bitcoin has experienced a significant decrease, reaching approximately 2,888 million BTC. This marks the lowest level since 2018, highlighting the current liquidity squeeze in the market. Despite this tightening of supply, Bitcoin’s value remains close to its peak from the last 18 months. However, it has recently dipped below $36,000 following a correction that exceeded three percent from its previous bear market range.
The changing composition of Bitcoin wallet categories reflects the market dynamics. According to data from Sentiment, there has been a surge in small-scale investor participation. Over the past month, more than one and a half million new wallets holding less than one Bitcoin each have been created. Wallets containing between one to one hundred Bitcoins have shown little change, with only an eighteen-address decrease. On the other hand, wallets with over one hundred Bitcoins have reduced by nineteen addresses, suggesting profit-taking by larger investors.
Despite these shifts in wallet distribution and supply dynamics, on-chain metrics paint a positive picture. Nearly seven hundred and three thousand transactions have been recently recorded. Transaction fees have risen to $18.67 during periods of intense activity, such as the Ordinals frenzy. In response to these market conditions and aiming to attract new traders, Binance Futures has launched an incentive program. This program offers a hundred-dollar bonus and discounted fees for the first month to its users. The move by one of the largest cryptocurrency exchanges underscores the competitive nature of the market as it adapts to changing liquidity patterns and investor behaviors.
In conclusion, the liquidity squeeze in the Bitcoin market is evident through the decrease in highly liquid supply. The changing composition of wallet categories indicates increased participation from small-scale investors and profit-taking by larger investors. However, on-chain metrics remain positive, with a significant number of transactions recorded. The rise in transaction fees during periods of intense activity highlights the market’s dynamics. Binance Futures’ incentive program further demonstrates the competitive nature of the market as it responds to changing liquidity patterns and investor behaviors.
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