Institutional inflows into spot Bitcoin (BTC) ETFs could potentially trigger a “sell-side liquidity crisis” by September, according to industry analyst Ki Young Ju, the CEO of the on-chain analytics platform CryptoQuant. In a recent discussion on X, Ki forecasted a significant shift in BTC supply within the next six months. He highlighted the emerging trend of Bitcoin as an institutional investment, particularly with spot Bitcoin ETFs gaining substantial traction in the United States. Currently holding close to $30 billion, BTC ETFs have witnessed the most successful launch in ETF history.
The continuous influx of funds into spot Bitcoin ETFs may lead to a situation where the demand for Bitcoin surpasses the available supply, potentially resulting in a Bitcoin ETF liquidity crisis. Ki emphasized that as long as spot Bitcoin ETF inflows persist, market bears will face challenges in gaining dominance. Notably, ETFs alone accumulated over 30,000 BTC in the previous week, while exchanges and miners collectively hold around 3 million BTC, with US entities holding 1.5 million BTC.
Ki’s analysis suggests that if the current rate of ETF inflows continues, a sell-side liquidity crisis could unfold within the next six months, creating a scarcity of Bitcoin available for sale. This could significantly impact Bitcoin’s price discovery phase and potentially lead to a higher cyclical top due to limited sell-side liquidity and a thinner order book.
Despite daily outflows of approximately $500 million from the Grayscale Bitcoin Trust (GBTC), the value of GBTC’s BTC holdings has remained stable, supported by Bitcoin’s price appreciation since the ETF’s launch in January. Ki anticipates that once the tipping point of ETF demand is reached, the effect on Bitcoin’s price could surpass market expectations, with a sell-side liquidity crisis restricting sellers and resulting in a thinner order book.
Ki also highlighted the increasing trend of BTC held by “accumulation addresses,” which are wallets that solely receive inbound transactions. However, these holdings would need to double before a crisis emerges, as the recent surge in Bitcoin to new all-time highs has caused accumulation address holdings to stabilize.
The market is eagerly anticipating the potential introduction of options trading on spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC). The SEC recently extended the response deadline for the Cboe Exchange and the Miami International Securities Exchange, both seeking approval to offer options on Bitcoin ETFs. Analysts, including VettaFi’s Dave Nadig, anticipate that the introduction of BTC ETF options could attract hedge fund players previously uninvolved in the crypto market, providing them with an avenue to engage in the industry.
Furthermore, the SEC is considering multiple leveraged Bitcoin ETFs, with filings from asset managers like Direxion, ProShares, and REX Shares for various inverse, long, and leveraged Bitcoin funds. These developments indicate a growing interest in Bitcoin ETFs and the potential for expanded participation in the cryptocurrency market.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
