Bitcoin Is Having A “Sell-Side Liquidity Crisis,” As BTC Buyers Outweigh the Sellers


After an explosive start of the week that took us to a 13-months high of $13,300, Bitcoin is taking a breather just under $13,000.

Interestingly, there have only been 43 such days in Bitcoin's history when the BTC price was higher than this new 2020 high.

Not outright, but Ethereum and the rest of the market also joined the party. The gains recorded by altcoins are still small compared to Bitcoin, but greens are surely here.

All these gains even helped Grayscale to add a “cool” $300 million in assets under management in one day, bringing the AUM it to $7.3 billion.

According to Charles Edward, Founder Capriole Investments, this isn’t euphoria yet, but a “very healthy” move.

“This pump is organically spot driven. There is almost no order book resistance. Yes, things can change quickly, it's crypto. But this is a very healthy move. Something we have never seen before at 12K plus bitcoin,” he said.

Might be Overbought But Still the Beginning

Up 79.50% YTD, the leading cryptocurrency is still 35% away from its all-time high of $20,000.

According to Bloomberg, Bitcoin has overheated, based on Bitcoin’s 14-day Relative Strength Index (RSI), currently having a reading of 80, a level considered overbought.

“Something unanticipated needs to occur to trip up advancing Bitcoin, as we see it, yet the crypto may need a new catalyst to sustain above $14,000,” wrote Mike McGlone, an analyst at Bloomberg Intelligence. “Absent a reversal in key metrics showing increasing demand and adoption, breaching resistance should be a matter of time.”

Overall, things are very much bullish for Bitcoin, and as billionaire hedge manager Paul Tudor Jones said, the digital currency is still in the “first inning.”

“If history rhymes, 2021 is going to be a BIG year,” said former hedge manager Raoul Pal.

Strong Demand Absorbing Sales

Currently, the market is getting into a “sell-side liquidity crisis” as not many people are selling their BTC rather they are “holding on to their bitcoin even if they have made good returns,” noted Philip Gradwell, Chief Economist at Chainalysis.

As we have reported, 98% of all Bitcoin UTXOs are currently in a state of profit, and in the last six weeks, there have been the lowest levels of bitcoin sent at a 25% or more USD gain while prices have been above the psychologically important level $10,000.

“This keeps the supply of bitcoin available to buy low, which increases prices,” said Gradwell.

However, on Wednesday, when the Bitcoin price climbed above $13k, 107,000 BTC were sent to the cryptocurrency exchanges as some people took the profit. These BTC were traded on average 5.8 times, more than double the 90-day average, which means while people are taking advantage of the rising prices to realize gains, “they are currently being outweighed by buyers.”

“We haven’t seen inflows to exchanges at that level since early October and prior to that early September. However, current demand is strong, balancing inflows,” added Gradwell.

At that time, people were selling into falling prices, unlike when demand is strong and absorbs sales.

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