Bitcoin Liquidity Shortage by September? 

The Bitcoin market may face a significant challenge in the form of a “sell-side liquidity crisis” by September, according to predictions from industry experts. Ki Young Ju, the founder and CEO of CryptoQuant, an on-chain analytics platform, shared insights on X (formerly Twitter) on March 12, suggesting that the supply of Bitcoin could reach a critical point within the next six months.

This potential crisis is rooted in the increasing interest of institutional investors in Bitcoin, especially with the rise of United States-based spot Bitcoin exchange-traded funds (ETFs). These ETFs have seen remarkable success, amassing nearly $30 billion in holdings and becoming the most successful ETF launch in history. This growing trend indicates a significant shift towards Bitcoin as a preferred investment among institutions, raising concerns about the availability of Bitcoin to meet the surging demand.

Ki emphasized the pivotal role of continued inflows into spot Bitcoin ETFs, stating, “Bears can’t win this game until spot Bitcoin ETF inflow stops.” He highlighted that in just the last week, ETFs accounted for more than 30,000 BTC in net inflows, with known entities such as exchanges and miners holding around 3 million BTC, including 1.5 million BTC by U.S. entities. At this pace, Ki predicts a looming sell-side liquidity crisis within six months.

Contrasting with this trend, the Grayscale Bitcoin Trust (GBTC) has experienced daily outflows, reaching up to $500 million. Despite these outflows and the price increases since the ETF launch in January, commentators like WhalePanda have noted that the dollar value of GBTC’s Bitcoin holdings has remained relatively stable. WhalePanda’s comments on X, referencing Barry Silbert, the former CEO of Grayscale’s parent company, Digital Currency Group, pointed out the paradox of GBTC’s decreasing Bitcoin holdings and the steady dollar value of those holdings.

Ki anticipates that the impending liquidity crisis, driven by ETF demand, could propel Bitcoin prices to levels that exceed current expectations. He suggests that the combination of limited sell-side liquidity and a thin order book could lead to a significant price impact.

Furthermore, Ki indicated a broad uptrend in Bitcoin held by “accumulation addresses” — wallets characterized by only receiving transactions, which need to double before the crisis materializes, underscoring the growing trend of Bitcoin accumulation among investors.