According to recent data from Glassnode, an on-chain analytics firm, the Bitcoin highly liquid supply has experienced a significant decline since last year. Notably the decline in supply is despite the Bitcoin market is experiencing slight gains recently following the price decline that occurred post the regulatory crackdown in the United States.
Analysts suggest that circulating supply can be broken down into three categories: highly liquid, liquid and illiquid supply. Illiquid supply is defined as entities that hold over 75% of the Bitcoin they take in whereas highly-liquid supply is defined as entities that hold less than 25%.
Recently, the highly liquid supply for Bitcoin has recorded a stark decline across the Glassnode cycle. As per data, currently the metric is residing near a cycle low of 2.94 million Bitcoin. Notably, this marks a decrease of 620,000 Bitcoin since Jan 2022, which marked the instance when assets were becoming more illiquid.
Glsssnode suggests that this suggests a significant contraction in the actively tradeable supply, resulting in both a decline in liquidity, as well as a constrained supply side. However, depending on whether the liquid supply is decreasing to increasing the illiquid quantity, more analysis over bullish or bearish sentiments could be made.
Since the high illiquid supply suggest that more Bitcoin is being transferred into storage, indicating an increase in hodling habits and accumulation. In such cases, the decline in highly liquid supply also hints that there may not be a major sell-off or capitulation event at any time in the near future. Additionally, another set of data reveals the activity of Bitcoin whales in the recent weeks.
Data from Glassnode suggests that the Bitcoin supply held by whales have declined in recent weeks. The graph below suggests that the whales currently hold over 34.4%, which is one of the lowest points in the recent months.
Among the various timeframes, there are various halving instances highlighted and it we can be observed that the value has continued to decline. Notably, this suggests that whales are either trying to diversifying their portfolio and dividing assets across addresses or there has been a sell-off in the market. Relating it to previous data where investors have recorded high inflows as well as outflows from the exchange due to the hostile regulatory environment in the US, the recent charts add to the trend.
This suggests that major investors are also affected by the regulatory environment and are concerned about their funds. As of writing, Bitcoin is changing hands at $26,402.40, about a 0.25% increase over the past day and about a 5% increase over the past five days.