Bitcoin’s Liquid Inventory Ratio Hits Record Low, Sparking Demand Surge

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In a riveting turn of events, on-chain analytical data unveils that the Bitcoin’s “Liquid Inventory Ratio” has plunged to an unprecedented low. The implications of this development for the digital currency giant proves an intriguing narrative waiting to unfold.

Cryptocurrency expert and CryptoQuant CEO, Ki Young Ju, highlighted this intriguing trend in the context of Bitcoin’s Liquid Inventory Ratio. If one were to delve deep into the semantics of the phrase, it invariably explains the delicate balance struck between the sell-side liquidity inventory of Bitcoin and its corresponding market demand.

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Four key metrics are considered when estimating the sell-side liquidity inventory of Bitcoin. These include the collective exchange reserve, holdings of miners, over-the-counter (OTC) desk holdings, and Bitcoin seized by the US government. Among these, the foremost source of potential sell-side liquidity turns out to be the exchange reserve, comprehensively abridged as the aggregate amount tucked away safely within the repositories of centralized exchanges.

An analytical examination of the data spanning the last few years clearly maps the gradual dissolution of sell-side liquidity of Bitcoin. This plummet, primarily fueled by the dwindling exchange reserves, accurately documents investors’ preference for self-custody, seemingly opting to retain their Bitcoin for more extended timeframes.

Simultaneously, the demand side of the equation paints a compelling picture. Measured by the fluctuations in the 30-day balance of ‘accumulation addresses’, these are typically owned by purchasers of Bitcoin who display no record of sales, pushing the demand higher. However, entities like exchanges and miners are specifically excluded as they lean more towards the sell liquidity side.

Interestingly, demand for Bitcoin seemingly hit the roof recently, spurred by novel contributors like exchange-traded funds (ETFs). Acquiring lock-and-key status, all the purchased Bitcoin is presumably escorted out of circulation, fortifying these so-called ‘one-way traffic’ reserves.

Analyzing these concurrent trends in sell-side liquidity and demand paints a fascinating narrative. It is hardly surprising that the Liquid Inventory Ratio, computed as the equilibrium between these two forces, has experienced a downturn.

This downward trend has seen the value of Bitcoin hit rock bottom, suggesting a sell-side liquidity that’s stringent compared to the surging demand for the coin. This sets the stage for an engaging subplot that spins around the upcoming trajectory of the BTC rally, cognizant of an ever-stricter supply-side scenario.

Earlier, Bitcoin underwent a brief dip but appears to have regained momentum, making a rebound past the $70,200 threshold. Given these emerging trends, the narratives playing out in the world of cryptocurrency are nothing short of captivating. One can only await the twists and turns that await the pulsating journey of Bitcoin, underscored by riveting financial stratagems and market dynamics.

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Melinda Cochrane is a poet, teacher and fiction author. She is also the editor and publisher of The Inspired Heart, a collection of international writers. Melinda also runs a publishing company, Melinda Cochrane International books for aspiring writers, based out Montreal, Quebec. Her publication credits include: The art of poetic inquiry, (Backalong Books), a novella, Desperate Freedom, (Brian Wrixon Books Canada), and 2 collections of poetry; The Man Who Stole Father’s Boat, (Backalong Books), and She’s an Island Poet, Desperate Freedom was on the bestseller's list for one week, and The Man Who Stole Father’s Boat is one of hope and encouragement for all those living in the social welfare system. She’s been published in online magazines such as, (regular writer for) ‘Life as a Human’, and Shannon Grissom’s magazine.