The Bitcoin market may be heading towards a severe liquidity shortage, according to on-chain data firm CryptoQuant. Their latest analysis reveals that over the past month, Bitcoin’s monthly demand skyrocketed from 40,000 BTC to a staggering 213,000 BTC.
This meteoric rise in demand has been fueled by a combination of factors – the launch of new Bitcoin ETF products as well as aggressive accumulation by wealthy investors collectively referred to as “whales.” At the same time, CryptoQuant’s data indicates the total circulating supply of visible BTC has plunged to just 2.7 million coins, the lowest level since the market rout of March 2020.
This widening supply-demand imbalance could potentially trigger a liquidity crisis, with not enough Bitcoin to go around for buyers. Basic economic principles of supply and demand would suggest such a supply squeeze could drive Bitcoin’s price substantially higher in the near term.
However, analysts warn that an acute lack of market liquidity leaves BTC vulnerable to wild price swings in either direction, as large trades have an exaggerated impact in illiquid conditions. Many experts are therefore urging investors to pay close attention to liquidity levels going forward.
Bitcoin Price Outlook From Analysts
Elsewhere, popular crypto analysts are sharing their latest Bitcoin price outlook. Analyst Mags sees BTC potentially continuing to trade sideways for some time near its new all-time highs around $70,000, noting this would be consistent with the 2016 halving cycle where the price consolidated for around 150 days post-halving before igniting its historic bull run.
Mags believes any near-term dips in Bitcoin’s price should be viewed as the final opportunity to accumulate cheap exposure before the market inevitably turns parabolic once again. Similarly, analyst Ali is closely watching the short-term technical picture, identifying a potential head-and-shoulders pattern that could propel BTC as high as $74,760 if it can break above the neckline at $71,580.
With less than 20 days away, Bitcoin halving historically proves to be a major bullish catalyst as it slashes the rate of new supply coming online. Many investors will surely be keeping a close eye on if this cycle proves to be any different.
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