Throughout February, the Bitcoin price barely showed real hopes of a trend shift from its stark bearish structure. However, in the last day, the flagship cryptocurrency has witnessed a modest amount of buying momentum, which might suggest an incoming short-term rebound, despite the ongoing conflict between the US and Iran. However, data from a recent on-chain analysis has revealed a contrary perspective to this speculation.
Illiquid Supply Dominates Bitcoin Market
In their latest Quicktake post on CryptoQuant, the analytics group, Arab Chain, highlights that the liquid supply of Bitcoin on the Binance exchange has recently increased significantly. This post hinges on data obtained from the BTC Binance Liquid Vs Illiquid Supply Model. For context, this metric measures how much Bitcoin held on Binance is readily tradable (liquid) as against the amount on the exchange that is inactive or intended to be held long-term (illiquid).
Arab Chain reveals in the post that Binance currently holds a total of around 670,000 BTC in its reserves. Of that amount, approximately 83,000 BTC stands as the liquid supply, and about 587,000 BTC exists as an illiquid supply, placing the liquidity ratio at around 12%. It is also worth noting that the current liquid supply portion stands close to levels that were last seen in 2024.
Nonetheless, this uptick in liquid supply still falls within a broader story: Binance’s Bitcoin reserves remain overwhelmingly illiquid. The analyst explains that this behavior, where illiquidity surmounts liquidity, is often associated with less-active holdings, or relatively long-term positions, even as they are held on Binance.
Because illiquid supply is disproportionately higher than liquid supply, there is a counterbalance between expected sell pressure and the unmoving hands. This existing stability, according to Arab Chain, is due mostly to the fact that the readily available amount of Bitcoin pales in comparison to the total amount of BTC on the platform.
Rising Liquid Supply Signals Increasing Market Readiness
However, it remains that the liquid supply on Binance is steadily climbing, as it recently reached 2024 levels. As Arab Chain points out, liquid supply is more reactive to speculative activity and tends to expand alongside trading activity. Conversely, liquid supply often shrinks as the market enters periods of calmness or repositioning.
Hence, while this is not a direct signal of bearish intent, the current growth in liquid supply to 2024 levels suggests that Bitcoin traders are preparing for imminent volatility. It could also mean that investors are reallocating their positions or positioning in expectations of future price movements.
If this rise in liquid supply is followed by increasing sell pressure, it could be the signal to expect ensuing distribution. On the other hand, if demand should absorb the additional supply currently entering the market, the Bitcoin price could continue on its recovery journey. At press time, Bitcoin trades for $67,604, reflecting a 2.97% gain in 24 hours.
Featured image from Unsplash, chart from Tradingview
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