Bitcoin Faces Potential Sell-Side Liquidity Crisis in 6 Months

In a recent thread on X, CryptoQuant founder Ki Young Ju raised concerns about the continuous influx of capital into spot Bitcoin ETFs, warning of a potential sell-side liquidity crisis within six months if the trend persists.

Ju’s remarks come amidst a surge in spot Bitcoin ETF inflows, surpassing the $10 billion inflow mark for the first time.

Sell-Side Liquidity Crisis Concerns

Ju emphasized, “Bears can’t win this game until spot Bitcoin ETF inflow stops.” He pointed out that in the past week alone, spot Bitcoin ETFs witnessed netflows exceeding 30,000 BTC, with major players such as exchanges and miners collectively holding approximately three million BTC, with 1.5 million BTC held by entities within the U.S.

Bears can’t win this game until spot #Bitcoin ETF inflow stops.

Last week, spot ETFs saw netflows of +30K BTC. Known entities like exchanges and miners hold around 3M BTC, including 1.5M BTC by US entities.

At this rate, we’ll see a sell-side liquidity crisis within 6 months. pic.twitter.com/qwAbZJwSOl

— Ki Young Ju (@ki_young_ju) March 12, 2024

Recent data from BitMEX Research indicates that spot Bitcoin ETFs surpassed the $10 billion inflow mark for the first time since their launch in January. This surge in inflows has raised concerns among market observers about the potential for a future sell-side crisis.

Ju further forecasted that once the tipping point from spot Bitcoin ETF demand is reached, the impact on BTC’s price could surpass market expectations. He emphasized that a sell-side liquidity crisis could lead to a cyclical top exceeding projections due to limited sell-side liquidity and a thin orderbook.

#Bitcoin is currently in the price discovery phase.

Once a sell-side liquidity crisis happens, its next cyclical top may exceed our expectations due to limited sell-side liquidity and thin orderbook.

This could occur once accumulation addresses reach around a total of 3M BTC. pic.twitter.com/HgwGbHR8fL

— Ki Young Ju (@ki_young_ju) March 12, 2024

Highlighting ongoing trends, Ju noted an uptrend in BTC held by “accumulation addresses” – wallets characterized by only inbound transactions. However, he stated that the accumulation address must reach around 3M BTC for the crisis to happen.

Bitcoin ETF Inflows Surge

Recent findings show that there has been a notable surge of capital directed towards spot Bitcoin ETF products within the U.S. market.

Specifically, on March 11, $505 million was the netflows in these products, with BlackRock leading the way with daily inflows amounting to $562 million. VanEck’s HODL product also observed a noteworthy uptick, as inflows soared to a remarkable $118 million on the same day.

The surge in inflows into VanEck’s HODL product can be attributed to a campaign announced by the company. VanEck has initiated a fee waiver campaign effective from March 12 until March 31, 2025. During this period, fees for the product will be waived until its assets reach $1.5 billion, after which a 0.20% fee will be imposed.