In brief

  • Chainalysis writes that over three-quarters of mined Bitcoin is illiquid and/or with investors.
  • Meanwhile, new buyers are coming into the market.
  • With less Bitcoin available to buy, the price is going up.

At the end of the day, prices in free markets typically come down to two factors: supply and demand.

So, it should be no surprise that Bitcoin's recent surge—from under $12,000 a month ago to nearly $18,000 today—is the result of strong demand amid depressed supply. But who wants it? And why exactly can't they get enough?

New research from blockchain analytics firm Chainalysis indicates that institutional investors are primarily to thank (or blame, depending on your perspective) for the supply drought and subsequent price increase.


“While the total supply of Bitcoin grows every day as more is mined, the actual amount available to buy depends on whether holders want to sell or trade it,” it wrote in a blog post today. Currently, 77% of all 14.8 million Bitcoin that have been mined (but not presumed lost) are in illiquid wallets, which it classifies as a wallet that has sent "less than 25% of Bitcoin they’ve ever received."

Bitcoin liquidity and price over time.
Bitcoin liquidity and price over time. Image: Chainalysis

“That leaves a pool of just 3.4 million Bitcoin readily available to buyers as demand increases,” said Chainalysis.

It points to corporate investments by Square and MicroStrategy as well as well-publicized statements from hedge fund manager Paul Tudor Jones as indications of increased institutional investment. 

That’s benefitted North American exchanges, who have seen increasing net inflows of Bitcoin since January 2020. 

“This is what we would expect to see,” said Chainalysis, “as the institutional investors driving the current surge, themselves primarily based in North America and Europe, are more likely to buy Bitcoin on these exchanges for both ease of use and regulatory reasons.”


And when they buy it, those investors hold on to it.

But they’re doing so at a time when new everyday investors are flocking to the market (likely because they’re following the lead of institutional investors). The number of new Bitcoin addresses being created each day neared 25,000 earlier this week. And crypto-to-fiat exchanges—as opposed to crypto-to-crypto exchanges for traders—are seeing an influx of Bitcoin as well.

“This, combined with the accumulation of Bitcoin by investor wallets that tend to hold for long periods of time, suggests that first-time Bitcoin buyers and buyers looking to unload fiat currency for Bitcoin as a hedge against worrisome macroeconomic trends are responsible for much of the current demand,” concluded Chainalysis.

Which all makes sense. But has Chainalysis considered that maybe Maisie Williams orchestrated all of this?

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