Bitcoin Illiquid Supply at Record Highs as Accumulation Begins

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  • Bitcoin seems to be in an accumulation phase as sellers are replaced by buyers
  • Bitcoin has been in a distribution phase since mid-2021
  • Illiquid Bitcoin has also reached new highs, suggesting holders are holding tighter

Bitcoin’s illiquid supply has hit an all time high, offering yet more evidence that an accumulation phase is currently underway. At a time of global financial uncertainty it seems that Bitcoin is being held tight more than ever before, with activity among longer term holders reducing, which is suggestive of bitcoin being stockpiled ahead of a run in the near future. Data from Cryptoquant suggests that Bitcoin has largely been in a distribution phase since mid-2021 but that has shifted to accumulation as price has settled around the $40,000 range, meaning people are buying rather than selling.

Bitcoin Accumulation and Distribution Tells a Tale

Bitcoin’s accumulation-distribution pattern is a very stark one that echoes with every cycle dating back to 2011, as highlighted by Cryptoquant CEO Ki Young Ju:

As we can see, accumulation (buying) takes place in a bear market when people stock up on cheap bitcoin, which turns into distribution (selling) when the acceleration runs out of steam. In the latest cycle, accumulation started in 2019 and ended in mid-2021 when Bitcoin hit $65,000. Since then it has been in a distribution pattern, which looks to have begun a reversal now.

This theory is buoyed by the fact that illiquid bitcoin supply, which is the volume of coins held in wallets with little or no history of spending, has increased to its highest level in nearly 10 months:

We have also recently seen some of the biggest single-day buying volumes for months on Bitcoin. As the charts suggest, this means that we are likely in for a period of slow and steady growth as sellers are replaced by buyers, with distribution likely to begin next year after another typical parabolic run.