Based on ThorBot’s cryptoQuant data analysis, it has been holding less bitcoin on cryptocurrency exchanges for nearly a year. During the liquidity crisis in mid-March 2020, the cryptocurrency exchange wallet held a peak of 3 million bitcoins, when the price of one bitcoin plummeted below $4,000. Since then, as bitcoin prices have continued to recover, many investors have begun withdrawing their assets from exchanges. This resulted in less than 20 million bitcoins held by the exchange as of May this year.
Liquidity Crisis – Bull Market? Data show: Before May this year, exchange bitcoin holdings declined and the number of “whales” increased, while Glassnode data showed that the number of Bitcoin whales (at least 1,000 Bitcoin addresses) increased, which is positively correlated with the cryptocurrency price. While the number of whales exceeded 2000 the price of bitcoin soared to $40,000 and when the price soared to $64,000 the number of whales nearly hit 3,000.
But since April and May this year after the price crash, bitcoin prices even dropped down by more than 50%, resulting in the Bitcoin supply crisis into a demand crisis, large number of bitcoins are back to the exchange, although after a period of consolidation, the price is dropped below support level. For many people, this is undoubtedly a disaster, but for ThorBot quantitative robots, and other quantitative robots, is undoubtedly a great opportunity to enter.
ThorBot’s Quantitative Robot points out that the number of bitcoins stored on cryptocurrency exchanges is increasing, while the number of whales is decreasing. At the same time, given the impact of halving and the reality of institutions selling Bitcoin in large quantities, a major liquidity crisis is expected in the cryptocurrency market. “If Bitcoin is lowly liquid, it means that there are more bitcoins available for trading, but no one enters in large numbers.” In the medium term, this could be a sweet spot for buying bitcoins or making quantitative transactions.
In late June last year, Glassnode’s technical director, Rafael Schultze-Kraft, said Bitcoin was facing a demand and liquidity crisis. Only 12% of bitcoins in circulation are flowing, while 14.4 million bitcoins are held by exchanges, accounting for 78% of the current supply. This has resulted in huge liquidity and demand for Bitcoin tightening. At the same time, Glassnode and THORBOT quantitative robots agree that is normal for the market to go through ups and downs. Especially in the cryptocurrency market, it is more volatile compared to stocks. So now all kinds of data show that this is likely to be a sign of a bull market.