Crypto analysts are pushing back the narrative that the current BTC rally is fueled by a liquidity crunch affecting bitcoin mining pools in China. The tightening of liquidity, caused by an ongoing regulatory crackdown in that country, has reportedly left miners unable to sell their holdings in BTC.
Rather, analysts are supporting a counter-narrative that highlights institutional investor interest as the reason for the current rally in BTC. Using data to back up their claims, analysts suggest that the current uptrend, which has different characteristics than 2017, is likely to continue as institutional investor interest continues to grow.
Lucas Nuzzi of Coinmetrics is the first to present data that demystifies the narrative of China’s liquidity crisis. In comments made via Twitter thread, Nuzzi argues that mining pools that don’t sell their BTC shares at this point are simply “part of a long-term trend.” Indeed, data from Coinmetrics shows that mining pools, the majority of which are predominantly domiciled in China, are not selling because their stock levels have stayed in the same range for the past 24 months.
On the other hand, the data shows that it is the stocks of individual miners that have been declining for the past month. This, according to Nuzzi, suggests that miners are in fact capable of selling. Next, Nuzzi uses another metric to strengthen his argument against the liquidity crunch narrative. Nuzzi says:
Now, let’s take a look at the miners outputs, which directly measure the outgoing payments of pools (red) and individual miners (green). Again, the data invalidates this narrative. Recent surges in remittances show that miners are moving assets, indicating their ability to sell.
Further, according to the analyst, “The 30-day miner inventory also suggests that nothing extraordinary is happening in the mineral deposits or their individual constituents.
With data seemingly discrediting the narrative of the liquidity crunch, Nuzzi instead thinks that “other factors, such as increased institutional participation and macroeconomic concerns, are more likely to be the culprits.”
Institutional investors behind the BTC rally
Meanwhile, blockchain analytics firm Chainalysis concludes similarly thread that big corporations and billionaires are behind the current bitcoin rally. In its analysis, the company claims that “demand is high at a time (when) relatively few bitcoins are available for purchase.” The company adds that “77% of mined BTC that has not been lost is currently held in illiquid wallets that historically send less than 25% of the Bitcoin they receive.”
That leaves a pool of just 3.4 million BTC for buyers at a time when the digital asset is gaining the endorsement of traditional organizations.
Additionally, Chainalysis compares the current data with that of 2017. The data shows that the amount of BTC held at the end of 2017 is almost similar to current levels. Using this data, the thread ends:
The amount of Bitcoin available for purchase is similar to the bull run of 2017. But in 2017, the illiquid wallets we mentioned, which we believe are mostly owned by long-term investors, didn’t were not as important.
In the rest of the thread, Chainalysis highlights the growing evidence of institutional investors buying BTC for holding as the reason for the price hike.
Do you think the liquidity crunch in China is not the cause of the BTC rally? Let us know what you think in the comments section below.
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