The demand for Bitcoin has increased many times over in 2020. And on-chain data shows that the asset’s limited supply can cause a rush.
The Bitcoin FOMO train
Bitcoin, the world’s largest cryptocurrency, saw demand surge last year amid bleak economic prospects, concerns over dollar inflation, weakened fiat currencies, incessant money printing, and low returns on traditional investments.
The rally even saw institutional players take notice of the asset as it broke its all-time high of $ 19,800 and rose to as high as $ 41,750 in December 2020. Some of them are multi-billion dollar funds like Guggenheim Partners, which registered their interest in BTC with the US Securities and Exchange Commission last year.
Others took the plunge. Billionaire investor and head of Tudor Investments, Paul Tudor Jones, poured nearly 2% of his capital into the asset class, claiming it was „great speculation“ and the „fastest horse“ of any other asset in the open market.
Technology companies were also investing quickly. Fintech service Square, owned by Bitcoin advocate and Twitter founder Jack Dorsey, invested $ 50 million of its funding in BTC and said it was an instrument of “economic empowerment and an opportunity for the world to participate in a global monetary system . „
But that was still small compared to the Bitcoin purchase from the business intelligence company MicroStrategy. Beginning in August 2020, the company built a $ 1 billion position in Bitcoin. The largest purchase came in December when the company raised $ 650 million in convertible bonds and used the proceeds to buy more Bitcoin.
What on-chain data says
Despite the volumes, institutional interest in Bitcoin is only just beginning. On-chain analyst Willy Woo currently writes in a tweet that the „whale spawning season“ is here – this shows a record number of large Bitcoin transactions.
„The world has 47 million millionaires, 71% of them live in the US or the EU, there are only 14.9 million BTC in circulation, and only 4.1 million BTC are liquid and can therefore be bought.“
Such a liquidity squeeze on the sales side likely caused the record purchases of Bitcoin last month – which in turn drove the price of the asset over $ 23,000 and beyond, according to Woo.
According to Woo, the data would show that the supply of 4.1 million “liquid” coins (or those available for sale) has steadily declined amid the rounds of money printing and stimulation. An observation that suggests the market is running out of sellers.