CryptoQuant says Bitcoin demand ‘eats’ available inventory, that’s how

In the middle of this bull cycle of the crypto market, the amount of bitcoins available for sale is decreasing rapidly relative to the growth in demand. According to an on-chain analysis by market intelligence firm CryptoQuant, the bitcoin market is currently experiencing a demand shock as demand growth accelerates and supply shrinks.

According to the weekly CryptoQuant report, apparent demand for BTC has expanded by 228,000 BTC per month since late September, while total BTC volume on crypto exchanges, over-the-counter (OTC) desks, miners, and the Grayscale Bitcoin Trust (GBTC) has increased since October. It has declined to levels not seen since 2020.

Demand for BTC is a supply of food.

The balance of BTC storage addresses, which refer to investors who buy BTC and sell nothing, is expanding by a massive 495,000 BTC every month.

Growth in bitcoin demand led to the largest monthly decline in 2024 in inventory levels on OTC desks for the first time since April 25. Balance as of November 20th.

“OTC desks source Bitcoin mostly for institutions and large buyers. If demand for Bitcoin exceeds supply, OTC desk Bitcoin balances will decrease, and vice versa. Now, demand is outstripping supply and their balances are dwindling, according to CryptoQuant.

Sell-side liquidity has fallen to 2020 levels

As demand increases, liquidity in the industry increases. The total market capitalization of US dollar-denominated stablecoins recently surpassed $200 billion for the first time, marking an increase of 20 percent, or $35 billion, since the end of October. This reflects the flow of liquidity and fresh money in the crypto market. The advance coincided with BTC's rally above $100,000 to $108,000. At the time of writing, the crypto asset was valued at $96,700, according to CoinMarketCap data.

Additionally, the sell-side flow of Bitcoin now hovers around 3.397 million BTC, the lowest level in four years. This liquidity has decreased further this year by 678,000 BTC, which greatly reduces the possibility of pressure selling.

Also, the current inventory ratio, a measure of how many months of current sell-side inventory is needed, fell to 6.6 months from 41 months in early October. CryptoQuant explained that the declining sell-side inventory ratio coincided with the BTC rallies seen during the first and fourth quarters of 2024.