Bitcoin’s $100K hold explained: It’s not retail, it’s a liquidity shortage
Liquidity on Exchanges has declined significantly over the past 18 months, propelling BTC's growth.
Key Takeaways
Bitcoin’s sustained rally is underpinned by a prolonged liquidity shortage, not retail speculation. What happens if whales finally start booking profits?
Bitcoin [BTC] has held above $100k for 89 days, reflecting sustained growth with healthy market corrections along the way.
But as analysts dig into the data, the real engine behind this rally isn’t the retail crowd—it’s a deepening supply crisis.
Exchange Netflows tell the real story
According to CryptoQuant analyst Axel Adler, Bitcoin’s average Exchange Netflow on centralized exchanges has been negative almost every day since late February 2024.
Only two days recorded net inflows; on every other day, coins left exchanges faster than they arrived.
And so, BTC available liquidity in the spot market has declined gradually, creating a supply shortage and, in turn, fueling growth.
Bitcoin scarcity deepens
Supporting this thesis, data from Bitbo shows Bitcoin’s Stock-to-Flow ratio surged to 369.4K BTC.
In fact, the Stock-to-Flow model projects a theoretical BTC price of $3.2 million. Typically, a tightening supply against steady or rising demand pushes prices higher.
Whales are in full accumulation mode
In the previous cycles, Bitcoin rallied backed by speculative and retail demand. Now, market power dynamics have shifted, and large entities are the driving force.
According to Checkonchain, Bitcoin whales have exhibited maximum restraint in selling. As such, Whale to Exchange Balance Change has mainly remained negative for the past 3 months.
At press time, Whale’s exchange balance was -73k BTC, while Mega Whale’s balance was -19k BTC. A negative balance for a sustained period signals that whales have refused to sell despite record-breaking profits.
Spot ETF demand compounds the pressure
Significantly, another key factor driving Bitcoin’s Liquidity decline is institutional demand for BTC through Spot ETFs.
Interestingly, the declining liquidity coincides with the approval of BTC Spot ETFs in early 2024. Since then, Bitcoin held by ETFs has exceeded 1.3 million BTC, worth over $149 billion.
Such a massive uptick in Bitcoin ETF AUM reflects sustained accumulation from institutions and other investors indirectly.
This demand has played a significant role in pushing BTC to its recent ATH, since retail demand has remained relatively minimal.
How far can the current demand propel BTC?
According to AMBCrypto’s analysis, Bitcoin experienced sustained growth amid significant demand from whales and institutions.
As a result, BTC scarcity has surged significantly, reaching a new high, which is a key driver for a sustained upward momentum.
That said, if the prevailing demand across major players persists, Bitcoin will recover from the recent correction and continue with the uptrend.
A trend reversal may see BTC reclaim $117k resistance, where it faced multiple rejections, and target a new ATH.
However, if large entities turn bearish and start selling, the correction will deepen, and BTC could seek support around 110,5722.
