According to onchain analytics firm Glassnode, 78% of the circulating Bitcoin supply is currently classified as illiquid and barely accessible for trading. The research breaks down the figures: approximately 14.5 million BTC are considered illiquid, leaving only 4.2 million BTC in constant circulation available for buying and selling. Glassnode tweeted: “78% of the circulating bitcoin supply is illiquid and therefore hardly accessible for buying. This points to a bullish investor sentiment as large amounts of BTC are being hoarded – which reduces sell pressure.”
Liquidity Crisis Fueling the Bull Run?
Glassnode defines Bitcoin liquidity as the average ratio of received and spent BTC across entities. The data reveals that an additional 1 million BTC became illiquid over the course of 2020—a clear sign that investors are increasingly HODLing. The firm noted that the illiquid supply has been swelling faster than the newly issued coins from miners, a pattern also observed during the 2017 bull run. This emerging Bitcoin liquidity crisis is seen as a partial driver of the current uptrend, which has been supported by reduced sell pressure and strong institutional demand.
Institutional Hoarding and Exchange Balances Decline
Throughout 2020, large financial institutions and well-known hedge fund managers have been purchasing Bitcoin in massive quantities. The public Bitcoin treasuries list now includes 29 well-known companies holding a combined 1.1 million BTC for treasury reserves. Meanwhile, exchange balances are shrinking. According to Bituniverse’s Exchange Transparent Balance Rank (data from Peckshield, Etherscan, and Chain.info), Coinbase leads with 870,000 BTC, followed by Huobi (252k BTC), Binance (215k BTC), Bitfinex (142k BTC), and Kraken (137k BTC). Exchanges hold fewer Bitcoins than they did last year, reinforcing the narrative of tightening supply.
Scarcity Narrative Intensifies
Bitcoin’s protocol guarantees a fixed supply cap of 21 million coins, of which approximately 18.58 million BTC have already been mined. Glassnode’s data shows that the actual tradable supply is far smaller than the nominal circulating supply. This scarcity is a cornerstone of Bitcoin’s value proposition as “digital gold.” With accelerating institutional adoption and retail investors preferring to hold, the liquidity crunch may continue to shape market dynamics, potentially sustaining upward price pressure in the future.