Data shows that Bitcoin supply continues to tighten. What impact will this have on the market?

Analysts believe that Bitcoin is in the midst of a liquidity crunch as it is pushed to new all-time highs . While some of the recent rallies have been driven primarily by derivatives buyers, it is clear that a large amount of BTC is accumulating through spot exchanges.

Glassnode CTO Rafael Schultze Kraft shared the chart below on Dec. 21, which shows BTC’s price and the supply of Bitcoin on exchanges over a macro timeframe.

It can be seen that the number of Bitcoins on exchanges has been falling sharply since the high of $10,500 during the rally in February this year. Schultze Kraft and others believe that this shows that Bitcoin is in a liquidity crisis with a decreasing supply, which will push up the price over time.

Schultze said, “ Bitcoin is in a liquidity crisis with a decreasing supply, which is very bullish and possibly even undervalued. I believe we will see this clearly reflected in the price of Bitcoin in the coming months, let’s take a look at the detailed data.”

So, why does this phenomenon happen?

Some evidence suggests that driving the decline in Bitcoin storage on exchanges is the rise in institutional players.

Just this Monday, MicroStrategy, a US-listed commercial software giant, announced that it had purchased another 29,646 bitcoins at an average price of $21,925, with a total value of more than $650 million. According to previous purchase data, MicroStrategy currently holds 70,470 bitcoins at a total price of $1.125 billion and an average price of $15,964.

MicroStrategy CEO Michael J. Saylor said, “Today’s announcement of additional Bitcoin purchases reaffirms our belief that Bitcoin, as the world’s most widely used cryptocurrency, is a reliable store of value. We believe that active management of the balance sheet, coupled with improvements in the company’s revenue and profitability, are important factors in the recent stock price increase .”

The CEO of MicroStrategy is arguably one of the strongest advocates for Bitcoin, even inviting Elon Musk to convert his dollars into Bitcoin when he became interested in the currency. In addition, MicroStrategy announced this month that it had raised more than $600 million through a bond issuance to buy more Bitcoin.

And as we all know, MicroStrategy is just one of many corporate and institutional clients that have purchased the leading cryptocurrency BTC.

Just a week ago, American life insurance company MassMutual confirmed that it had also purchased more than $100 million worth of Bitcoin. The company has other insurance companies joining the configuration, but did not disclose the names of these companies.

The original text comes from bitcoinist and was translated by Blockchain Knight. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.