Wait and see approach: 3/4 of Bitcoin supply now illiquid

Bitcoin markets have been consolidating ever since the start of the year. However, on-chain metrics paint a more positive picture because more assets are becoming illiquid.

Glassnode, an on-chain analytics provider, has been looking into Bitcoin supply metrics in order to gain a better understanding of longer-term macro trends. Its weekly report for Jan. 3 shows this.

These findings showed that while the asset traded sideways this year, more BTC is now illiquid. The illiquid supply has seen a rapid increase, now accounting for more than 36% of total circulating supply.

According to Glassnode, illiquidity is when BTC is transferred to a wallet that has no spending history. 24% of total liquid supply BTC is found in wallets that regularly trade or spend, such as hot wallets.

“We can see that even though prices have corrected over the last months of 2021 there has been an acceleration in coins from liquid to Illiquid wallets.”

These numbers indicate that Bitcoin is being stored more frequently, which indicates an increase in hodling and accumulation. A decrease in liquid supply suggests that there won’t be a major sale or capitulation in the near future.

BTC liquid and inliquid supply as a percentage of total: Glassnode

These conditions were interpreted by the researchers as indicating “divergence” between what appears to have constructive on-chain supply dynamics and bearish-to neutral price action.

Related:On crypto exchanges, just 1.3 million Bitcoin remain in circulation

Glassnode also stated in the same report that the supply of long-term holders had stagnated over the past month. This indicates that long-term investors are now hodlers and even accumulators, rather than spending coins or selling them. It concluded that this provided another positive view of market conviction.

The current supply of long-termers has fallen to 13.35 million BTC. This is just 1.1% less than October’s peak of 13.5million coins. Glassnode defines long-term holders as accounts or wallets that have had their Bitcoin for over 155 days.