Is Bitcoin Having a Sell Side Liquidity Crisis? – Trustnodes

Is Bitcoin Having a Sell Side Liquidity Crisis?


Bitcoin has been rising in its own yoyo way, eying that $10,000 for now months but still not quite taking it.

If we look at a longer time frame however, the currency’s maintenance of this level and its apparent inclination to go even higher has surprised many and has even angered some bankers.

There are many reasons and explanations for its rise. It being outside of the banking system for example while being easily transportable, is a pretty good reason for it to be valuable, but in this article we’ll look at what somewhat jokingly we are calling a sell side liquidity crises.

What is a sell side liquidity crisis? 0.1 btc on an old phone with a dead battery, might be one answer.

You might try and repair the phone, but not easy to do with iPhones for example and the cost might be more than the bitcoins in it.

For now, maybe not in say ten years, but by then this phone has probably been turned into scrap metal long ago.

Just how many such coins have been lost, coins that once were worth pennies and are now worth quite a bit, is not clear but for example there are close to 3,000 bitcoins in addresses that contain up to 0.001 btc or about $10.

Bitcoin distribution, July 2020
Bitcoin distribution, July 2020

Even three years ago they were worth a penny or so, meaning plenty has probably been forgotten in old wallets that have lost their keys long ago.

Much however would be on exchanges and after some time presumably they’d just take the coins for themselves, but another 30,000 bitcoins are in addresses that have up to 0.01 btc, worth $100 now but just $1 in 2015.

So all in all, some 4 million bitcoin has not moved since 2015 as pictured above in the featured image, worth $37 billion.

That goes on to rise because obviously people don’t move their coins all the time, with 17.1 million BTC, for example, not moving since June. Meaning 1.4 million bitcoin have moved since last month, worth $13 billion.

The older the non movement, the more likely you’d think these coins are lost, with 2.5 million bitcoins not moving since 2012.

Yet just because they have not moved does not mean they have been lost as some 2009 bitcoin miners showed recently by signing 145 bitcoin addresses.

Making all this far from an exact science, but at least it gives us some anchor to estimate how bitcoin’s supply might be falling through people throwing away their old laptop thinking it worthless.

That’s especially relevant now that bitcoin’s new supply has fallen to just 2% a year and is relatively decreasing as it moves towards the new halving because total supply will increase while the block reward will remain the same 6.25 btc for the next four years.

Making bitcoin on the verge of starting to become deflationary as people hold it because its unit of account is not being devalued anywhere near like fiat, but now not even as much as gold.

For gold the data is no where near as complete either in regards to its total supply or how much new supply is added every year.

Yet it should be around perhaps 2%, maybe 1% at the conservative end, with gold having the quality of incentivizing more production of it as price rises to the point even meteor gold mining can in theory become profitable.

While for bitcoin that supply doesn’t change regardless of what price does or anything else, with its complex incentives mechanism incentivizing more a wider distribution through new mining entrants than any change in supply.

Thus at times you do actually get a sell side liquidity ‘crisis’ especially during about two months of peak ‘mania’ when no one wants to sell and plenty actually want to buy more.

So you get those typical bitcoin ‘bubbles’ when everyone thinks it’s nuts that bitcoin’s price is rising and that ‘everyone’ was the same as those that watched it reach dollar parity.

Can dogecoin do it though? Ha, no chance, not after even a million TikTok songs.