Bitcoin Still 6 Months Away from ETF “Liquidity Crisis” – New Analysis

Bitcoin ETFs are absorbing available BTC for purchase, and a tipping point in supply dynamics will arrive this year, one analyst says.

Bitcoin

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One industry analyst said that if institutional funds continue to flow in, China will face a "sell-side liquidity crisis" by September.

In a March 12 X post, Ki Young Ju, founder and CEO of on-chain analytics platform CryptoQuant, predicted a BTC supply watershed “within six months.”

Ki: Bitcoin bears ‘can’t win’ while ETF flows continue

Bitcoin’s adoption as an institutional investment allocation is just beginning as U.S. spot bitcoin exchange-traded funds (ETFs) gain momentum, industry players say.

They currently hold nearly $30 billion in assets, making them the most successful ETF launches in history.

However, if this trend continues, a new phenomenon may emerge where there is not enough Bitcoin to meet demand.

“Until the Bitcoin ETF spot inflows stop, the bears cannot win this game,” Ki concluded.

He noted that with over 30,000 BTC stored in ETFs alone last week and 3 million BTC in exchanges and miner wallets, the potential for a supply-induced price shock became apparent.

“Last week, spot ETF net flows exceeded 30,000 BTC. Known entities such as exchanges and miners hold about 3 million BTC, of ​​which US entities hold 1.5 million BTC.”

“At this rate, we will see a sell-side liquidity crisis within six months.”

The Grayscale Bitcoin Trust Fund (GBTC) continues to buck the trend, with daily outflows regularly reaching $500 million.

Popular commentator WhalePanda noted that the dollar value of GBTC’s reduced BTC holdings has actually barely declined, considering the rise in BTC prices since the ETF launched in January.

"GBTC having a hiccup again with $494m outflows. Thanks Barry. They are now trading below 400k BTC," he wrote in the X post, referring to Barry Silbert, the former CEO of Grayscale's parent company Digital Currency Group.

“The problem is that with the increase in prices and the massive outflows, they are still holding the same amount of dollars as when we started.”

How many of the 1.4 million bitcoins are left?

Ki predicts that when the tipping point of ETF demand arrives, the impact on BTC prices may exceed market expectations.

“Once a sell-side liquidity crisis occurs, its next cycle top may exceed our expectations due to limited sell-side liquidity and low order volume,” he concluded.

Ki shows a broad-based uptrend in BTC held by so-called “accumulation addresses” (wallets that only conduct inbound transactions), which still needs to double before a “crisis” breaks out.

As Bitcoin hits new all-time highs, cumulative address holdings have reportedly started to cool recently.