Bitcoin has likely passed the worst of its downward pressure in the short term as the cryptocurrency has seen a steep decline in sellers on exchanges, according to crypto analysts.
“Bitcoin’s sell-side liquidity is shrinking at a rapid pace,” Bitfinex analysts said in a Jan. 6 markets report.
Declining liquidity inventory ratio is bullish for Bitcoiners
The analysts explained that Bitcoin’s (BTC) liquidity inventory ratio — measuring how long Bitcoin’s current supply can meet demand across exchanges — has dropped from 41 months in October 2024 to just over 6.5 months.
This is bullish for crypto traders as a tightening supply creates the perception of a scarcity effect of the asset, which typically drives prices up.
“This significant decline aligns with the rallies observed in both Q1 and Q4 of 2024, indicating a tightening of available liquidity during periods of strong market activity,” Bitfinex analysts said.
At the time of publication, Bitcoin is trading at $96,880, per CoinMarketCap.
On Jan. 6, Bitcoin’s price bounced back to the $100,000 mark for the first time since Dec. 20, but within 24 hours, it pulled back to as low as $96,261.
Pseudonymous crypto trader Daan Crypto Trades said in a Jan. 7 X post that it is “going to be interesting” to see how Bitcoin’s price plays out in the short term.
“Overall, the market still remains choppy, which is usually the case near the end and the start of the year,” Daan said.
The Bitfinex analysts also said that the sharp decline in Bitcoin flows from miners to crypto exchanges in 2025 suggests that miners expect Bitcoin’s price to keep rising.
Crypto analyst says demand has also slowed
“Miners are currently in profit, and the prevailing bullish market trend allows them to operate with greater ease,” the analyst said.
“As a result, they have largely chosen to hold onto their BTC rather than sell.”
The analysts previously said in December 2024 that their minimum price estimates “stand at $145,000 by mid-2025, potentially stretching to $200,000 under favorable conditions.”
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Meanwhile, Glassnode lead analyst James Check said in a Jan. 7 market report that although Bitcoin selling has slowed, demand has been tapering off too.
“Sell-side pressure by existing holders is dissipating, but so are some indicators of fresh demand,” Check said, noting that “spot trading volume is falling off a cliff as we speak, down 53% since November.”
Between Nov. 5 and 23, 2024, Bitcoin’s price surged around 46%, reaching $99,006, before surpassing the $100,000 mark on Dec. 5.
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This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
