Examining the "sell-side liquidity crisis" brewing in the Bitcoin market

Even after the five percent drop that took place on Wednesday morning, Bitcoin remains far above the lows of September and early October.

Analysts believe that this price action is a clear byproduct of a brewing "Sell-side liquidity crisis." The theory goes that the intrinsic value in holding Bitcoin is increasing massively, leading to a simultaneous increase in holding activity and an increase in demand to buy BTC.After $14,000 there are literally no coins on the books.

These are the makings of a sell side liquidity crisis aka reflexive buying to the upside.

The sell-side liquidity crisis in the Bitcoin market.

It's becoming even more apparent looking at on-chain data and market data that investors are increasingly holding on to their Bitcoin.

CryptoQuant, a blockchain data firm, shared this chart below, showing that "Whale" Bitcoin addresses are depositing few coins into exchanges despite the price surge.

Glassnode data also indicates that the dollar value of deposits into exchanges has reached multi-week lows as investors are increasingly hesitant to sell their Bitcoin in anticipation of upside.

Order book data also shows an increasing amount of hesitance to short or sell Bitcoin.

The Wall Street veteran said that he expects Apple and Google to own Bitcoin to hedge inflation, adding that he expects fund managers on Wall Street to take on a similar risk in the years ahead. That's not to say that retail capital won't play a role in acting as a driver of demand for Bitcoin.

With PayPal and other prominent technology and finance companies dipping their toes in the crypto space, retail capital is likely to follow if Bitcoin continues its ascent.