You are here: Home / News / Bitcoin Bull Run Faces “Sell-Side Liquidity Crisis” Within 6 Months, Warns Analyst
March 13, 2024 by Kashif Saleem
The cryptocurrency market could experience a liquidity crisis within six months after the recent surge in popularity of Bitcoin exchange-traded funds (ETFs), according to CryptoQuant’s founder and CEO, Ki Young Ju, a well-known crypto analyst.
Bears can’t win this game until spot #Bitcoin ETF inflow stops.
Last week, spot ETFs saw netflows of +30K BTC. Known entities like exchanges and miners hold around 3M BTC, including 1.5M BTC by US entities.
At this rate, we’ll see a sell-side liquidity crisis within 6 months. pic.twitter.com/qwAbZJwSOl
— Ki Young Ju (@ki_young_ju) March 12, 2024
This potential crisis arises from the growing imbalance between rising institutional demand for Bitcoin and its limited supply. ETFs, especially U.S.-based spot Bitcoin ETFs, have seen tremendous growth, collectively holding almost $30 billion in assets—the most successful launch of exchange-traded funds in history.
However, the rapid inflow of institutional capital has led to concerns about a potential lack of supply. In this regard, Ki reveals that only ETFs have taken on board over 30,000 BTC during the past week. This is huge, especially when combined with an estimated 3 million BTC currently stored by exchanges and miners, which may mean that there is a chance of a price surge due to supply.
Bitcoin Supply Decreases Amidst Growing Demand
Ki’s analysis indicates that if the current trajectory continues, in which case it will be impossible to get enough Bitcoin for the growing demand. This could cause the prices to go high because of limited supply that is beyond market expectations.
Once a sell-side liquidity crisis happens, its next cyclical top may exceed our expectations due to limited sell-side liquidity and thin orderbook, he concluded.
However, it is important to consider opposing opinions. GBTC, the world’s largest Bitcoin investment vehicle in terms of assets under management, has been experiencing daily outflows of over $500 million. For instance, some critics, such as WhalePanda, have begun questioning ETF inflows in general.
This is problematic because despite the price increase and their significant outflows, their holdings in dollars have not changed since the beginning as WhalePanda pointed out in an X post talking about Barry Silbert who was once Grayscale’s parent company’s former CEO.
While GBTC outflows might seem contradictory to the narrative of rising demand, it’s worth considering that the dollar value of their holdings may not necessarily reflect a decline in Bitcoin holdings due to recent price appreciation.
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