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Sunday, December 5, 2021

Bitcoin Supply is shrinking

Hello Everyone today our topic is about Bitcoin demand is booming; Bitcoin Supply is Shrinking. In brief: Bitcoin’s growing demand is resulting in a supply crisis. According to Glassnode CTO Rafael Schultze-Kraft, the total amount of Bitcoin on exchanges has fallen 20% this year. But Schultze-Kraft said this shouldn’t prevent regular investors from buying in.

There are two key factors that affect Bitcoins price: supply and demand. And while the available supply has been shrinking, demand has been rapidly going up. Institutional investors and companies like MicroStrategy have been ploughing into the market, buying up huge quantities of Bitcoinincreasing the demand.

At the same time, data shows that the amount of Bitcoin available on exchanges has been declining massively. And this is already affecting the market.

Bitcoin is in a supply and liquidity crisis. This is extremely bullish! And highly underrated, Glassnode CTO Schultze-Kraft tweeted on Monday, adding, I believe we will see this significantly reflected in Bitcoin’s price in the upcoming months.” This year, Bitcoin has risen from lows of $4,000 in March to reach new highs above $24,000 in the last week 500% rise.

Here’s a closer look at the two factors that might be causing this momentum. Bitcoin is having a supply crisis While the total amount of Bitcoin is increasing over time as more is mined every day, the amount of available supply on exchanges (otherwise known as liquidity) has been declining.

And this makes it harder or more expensive for new investors to buy Bitcoin. According to Glassnode, the supply of Bitcoin held on exchanges has dropped 20% since January. It’s a trend that can be seen across all exchanges. The Bitcoin may have been sent away to long-term storage, to custodian solutions, or for larger investment funds.

But crucially, it means less available to trade. In fact, less than 13% of all Bitcoin in existence is currently held on crypto exchanges and available to trade. Glassnode also tracks the amount of Bitcoin that’s liquid (freely available to trade) as opposed to liquid, where its held off exchanges and not available to buy.

Here too, the amount of liquid Bitcoin has been declining, with just 12% of the total supply remaining as a liquid. Illiquid entities spend less than 25% of the BTC they receive, acting as supply sinks in the network, Schultze-Kraft said.

Just as Schultze-Kraft thinks the Bitcoin supply crisis won’t exclude regular or retail investors, nor does he think it will stop big institutional investors from buying more Bitcoin. Growing demand for Bitcoin An increasing number of institutional investors embracing Bitcoin has increased demand for the cryptocurrency in 2020.

Read More: Is bitcoin Safe and Legal?

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