Viewpoint丨A coin worth 288,000 US dollars, is BTC in a liquidity crisis?

As we know, the supply of Bitcoin is mathematically determined to be 21 million units, which will be reached in about 2140. The scarcity of cryptocurrencies in absolute value requires the following points to be considered by anyone studying this industry. In fact, Bitcoin has entered a very important phase since its creation, which is defined as the first real liquidity crisis. The largest sellers of Bitcoin are exchanges and miners, who, through their services, offer Bitcoin at the market price to all those who wish to buy it. If in the first years before 2017/2018, the supply was able to absorb the demand coming only from retail investors, today the situation is different.

With the entry of large institutions and investors, Bitcoin is now facing the huge amount of money these players bring. Even the simple 1% of some investment funds will create considerable problems to find the corresponding amount of Bitcoin. It is estimated that 70% to 80% of those who buy Bitcoin are unwilling to sell, instead they consider Bitcoin as a long-term investment, both for ideological reasons and to protect themselves from the depreciation of fiat currencies. In this case, all the weight falls on the exchanges, which must be willing to consume their reserves to meet all the demand for the asset, making Bitcoin an illiquid asset day after day.

In one case, the demand for capital increases, while the supply of Bitcoin is constantly decreasing, and this pattern is clear . In the short to medium term (half a year), when the gap between the terms just presented becomes very large, the price will be subject to great fluctuations. After analyzing one of the most famous models for Bitcoin price prediction, the stock-to-flow model, the given price no longer seems so impossible. If we analyze it from the perspective of illiquidity, then in 2021, the price of Bitcoin, such as $288,000, seems more and more reasonable.