Glassnode: Is BTC’s liquidity crisis still continuing?

Entering the first week of 2021, Bitcoin continues to set new all-time highs, breaking through $30,000 and continuing to climb. But ETH is the real winner this week, with a single-day increase of more than 37%.

Bitcoin Market Health

Bitcoin had another impressive week in the new year, reaching new all-time highs and surpassing $30,000 for the first time. The week opened at $26,270 and continued to rise, reaching a high of $34,550 before retreating slightly and closing the week at $32,685.

Bull Market

As the price of Bitcoin continues to rise, a large number of retail investors are also increasing their interest in Bitcoin, and the number of addresses holding non-zero amounts of Bitcoin has reached an all-time high of more than 33 million.

However, despite the rapid growth in news coverage and retail interest in Bitcoin, the number of new daily Bitcoin addresses has yet to reach 2017 levels. The steady and consistent growth of this metric (as opposed to the sudden spikes seen during the last major bull run) suggests that Bitcoin adoption is experiencing strong organic growth, but not typical frothy viral growth.

Thus, these indicators paint an optimistic picture of a market characterized by healthy, sustainable growth rather than hype.

Willy Woo's optimistic review

Willy Woo's opinion: In the long run, the structure of foreign exchange reserves suggests that the coming year will be a good year.

Reserve depletion on spot exchanges has stopped, which means the reaccumulation phase of the macro cycle may be over. The chart below shows where we are in the overall macro cycle through the lens of spot reserves.

What causes reserves to increase in the late stages of a bull market? Retail investors tend to store their cryptocurrencies on exchanges, which will cause net reserves to rise. This is the main stage of a bull market. Since we already know that institutions are buying heavily, the flattening of spot reserve depletion indicates that retail investors are buying heavily, attracted by the recent price increase.

Characteristics of Altcoins: ETH’s Bull Run

ETH surged more than 37% in a single day to break through the $1,000 mark during Sunday’s bull run, and is up nearly 7,500% compared to the same period last year, when the price was below $140.

The last time ETH reached this price was 3 years ago in January 2018, when it spent less than a month above $1,000 before falling back to triple digits. However, on-chain signals suggest that we are still in the early stages of a bull run relative to 2018 price levels.

For example, its MVRV ratio (which indicates when an asset may be overvalued) is still very low relative to early 2018, when prices were comparable to current levels.

When MVRV was at such low levels before the 2017 bull run, ETH was still below $25 and experienced a massive 58,000% rally until reaching its all-time high. This suggests that in the current market, ETH has room for further substantial growth before becoming overvalued.

Weekly Feature: Bitcoin’s Liquidity Crisis Continues

As investors continue to hoard and hold Bitcoin, Bitcoin's liquidity continues to be squeezed and the available supply becomes increasingly smaller.

Throughout 2020, Bitcoin’s “Illiquid Supply” liquidity category has been growing larger, while Liquid and High Liquidity Supply have been decreasing.

This is a very bullish sign, as scarcity leads to an increase in demand relative to supply, pushing prices higher. This chart also suggests that the current influx of retail investors is more likely to hold rather than realize gains, suggesting that there is more room for growth for both retail and institutional investors.