A Deepening Supply Squeeze

Bitcoin’s sell-side liquidity is contracting at a rapid pace, with the available supply on exchanges dropping to just 3.12 million BTC. This marks the lowest level recorded since 2018, signaling a significant reduction in the amount of Bitcoin readily available for purchase.

This supply shock is happening as long-term investors are steadily buying up the asset. According to on-chain data, addresses identified as long-term holders have accumulated a massive 373,700 BTC over the past month alone. This behavior, described by analysts as a “quiet accumulation” phase, highlights strong market demand despite recent price volatility.

The dynamic is further confirmed by the Liquidity Inventory Ratio (LIR), a metric that balances available liquidity against active trading demand. The LIR has fallen to approximately 8.3 months, suggesting that the current market liquidity could cover less than nine months of demand. A low LIR points to thinner order books, which can increase vulnerability to price volatility and slippage.

According to an analysis by CryptoQuant contributor Arab Chain, the combination of declining liquidity and growing demand from long-term investors paints a bullish medium-term picture. The analyst suggested that if this accumulation trend persists, especially with continued buying from U.S. investment funds and ETFs, it could support a significant upward price movement.

Has the Market Top Arrived?

While the shrinking supply suggests potential for price growth, the crypto community remains divided on whether Bitcoin has already reached its peak for this market cycle. Some on-chain indicators suggest there is still room to run. For instance, the Bitcoin NVT Golden Cross metric has not yet entered the territory that has historically marked previous cycle tops.

This sentiment is shared by other market observers. Fellow CryptoQuant analyst PelinayPA recently estimated that there is a 55% probability that Bitcoin has not yet hit its cyclical high, leaving the door open for further gains as the supply squeeze continues to tighten.