On-chain data shows that Bitcoin’s illiquid supply has recently surged to a new all-time high (ATH). Here's what this means for your assets:
Approximately 74% of the circulating Bitcoin supply is currently “illiquid”
In a new post on X, analyst James Van Straten discussed the latest trends in Bitcoin's illiquidity supply. The concept of Bitcoin “liquidity” comes from on-chain analytics firm Glassnode, which defines an entity’s liquidity as “the ratio of cumulative outflows to cumulative inflows over the life of the entity.”
“Entity” here refers to a collection of addresses that Glassnode determines belong to the same investor. Based on the value of this metric, entities can be classified into one of three categories: illiquid, liquid, and highly liquid. Entities with a history of high inflows but low outflows are placed in the illiquid category. More formally, the value of the indicator must be less than 0.25 for the majority of an investor's holdings to be considered part of the illiquid supply.
At the other end of the spectrum is a highly liquid supply, which consists of a balance of entities with a liquidity ratio greater than 0.75 (i.e., entities that have similar outflows as inflows). Illiquid supply essentially represents a frozen portion of BTC supply that is unlikely to move in the near future as it is locked away in investor wallets with little sales history. In contrast, a highly liquid supply corresponds to tokens that are constantly moving around.
In between the two are liquid supplies, which include entities participating in varying degrees of trading activity (liquidity ratios greater than 0.25 and less than 0.75).
Please note that the methodology adopted by the analysis company means that there are no sudden changes in the categories at the cut-off point. The transition between supplies is smooth (for example, an entity with a liquidity ratio exactly equal to 0.25 contributes 50% to non-current and 50% to current).
Here is a chart Van Straten shared showing the trend of Bitcoin's illiquid supply vs. liquidity + liquid supply.
The two metrics appear to have been going opposite ways in recent months | Source: @btcjvs on X
As seen in the graph above, Bitcoin's illiquid supply has been on the rise since the beginning of the year, suggesting that Diamond Hand is hoarding the coin. Following a continuation of recent increases, the metric has set approximately 14.7 million new ATHs. This represents approximately 74% of the total BTC supply in circulation.
“What's interesting is that the gap between illiquid and liquid plus highly liquid continues to widen,” the analyst said. “While market sentiment continues to favor HODLing, available trading supply continues to decline.”
BTC price
As of this writing, Bitcoin is trading around $64,900, up over 3% over the past week.
Looks like the price of the coin has gone through some recovery recently | Source: BTCUSDT on TradingView
Dall-E, featured image from Glassnode.com, chart from TradingView.com
