Around 4 Mln – That’s roughly what proportion bitcoin is presently circulating within the market, blockchain data reveals. The amount has been getting even smaller within each passing month over the last year.
In line with a recent analysis by Glassnode, the pattern suggests that the ever-decreasing supply of bitcoin available to purchase and sell might cause a price surge as more institutional investors embrace the leading crypto asset as an investment.
Bitcoin’s “liquid supply change” – the entire quantity by which the amount of coins in circulation has changed over the earlier 30 days – has been negative for many of the past year, consistent with Glassnode.
That’s an extended period in negative than seen historically, potentially providing more support to bitcoin’s price strength within the future despite short-term corrections like last week’s 21% retreat.
As of 1st Feb., there have been only about 4 Mln BTC in constant circulation and available for purchasing, trading, and selling, consistent with Glassnode. The 30-day net change of BTC supply held by liquid and highly liquid entities has been within the negative territory since last April, apart from a brief stint between July and August and again briefly earlier in December.
“This has never happened before for such a long period of time, and will cause a huge supply squeeze soon,” Glassnode added on 26th Feb. within its weekly newsletter.
The Bitcoin blockchain’s third halving since last May reducing the pace of mining rewards to 6.25 BTC for each data block [roughly every 10 minutes] from 12.5 BTC. At the same time, big Wall Street firms like Goldman Sachs, Citigroup, and BlackRock are now dabbling in crypto assets, while the payment giants PayPal and Square’s Cash App have permitted their users to purchase and sell the crypto assets.
Earlier on Monday, Daniel Loeb, CEO and founding father of the hedge fund Third Point explained within a series of tweets that he was taking a “deep dive into the crypto ecosystem.”
Alessandro Andreotti, an OTC [Over-the-Counter] bitcoin broker, added that “institutions are purchasing more bitcoin per month than those that are being mined, and they’re just isn’t enough for everyone.”
“This is the biggest factor that has been driving bitcoin’s price up lately,” he explained.
The supply dynamic could prove crucial to restoring a bull tone to the bitcoin market after last week’s price correction shook some retail investors’ confidence. The sell-off took bitcoin to close to $43k, down 26% from an all-time high price over $58k earlier on 21st Feb.
Compared with bitcoin’s last big market correction observed earlier in January, fewer long-term bitcoin holders seemed to be reducing their positions or taking profits last week, consistent with Glassnode. This will be seen within the chart below, where the shaded red area – indicating an edge reduction by long-term holders – has been moving back toward a neutral footing.