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2017 bull market, bull market, chain analysis, currency measurement, illiquid assets, institutional investors, liquidity crunch, Lucas Nuzzi, mining inventory, mining pools, regulatory crackdown
Cryptocurrency analysts are opposing the claim that the current BTC rally is being driven by the liquidity crunch that plagued Chinese Bitcoin mining pools. According to reports, due to the country’s ongoing regulatory crackdown, liquidity tightening has prevented miners from selling their BTC holdings.
Instead, analysts support a counter-narrative, pointing out that the interest of institutional investors is the reason for the current BTC rebound. Analysts use data to support their views and believe that the current bull market has different characteristics from the bull market in 2017, and this bull market is likely to continue as the interest of institutional investors continues to grow.
The first data to expose the narrative of China’s liquidity crunch was Lucas Nuzzi of Coinmetrics.Comments via Twitter lineNuzzi believes that mining pools that do not currently sell BTC stocks are only “part of the long-term trend.” Indeed, Coinmetrics data does show that mining pools (most of which are mainly located in China) are not sold because their inventory levels have been within the same range for the past 24 months.
On the other hand, data shows that the inventory of individual miners has fallen in the past month. According to Nuzzi, this shows that miners are actually capable of selling. Next, Nuzzi uses another metric to support his argument for the liquidity crunch narrative. Nuzzi said:
Now, let us look at the outflow of funds from miners, which directly measure the expenditures of mining pools (red) and individual miners (green). Again, the data invalidates the statement. The recent surge in funds sent indicates that miners are transferring assets, which signifies the ability to sell.
The analyst also said: “The 30-day rolling list of miners also shows that there is no abnormality in the mining pool or its various components.”
Nuzzi believes that because these data clearly obliterate the liquidity crunch, he believes that “other factors, such as more institutional participation and concerns about the macro economy, are likely to be the culprits.”
At the same time, blockchain analysis company Chainalysis itself has reached a similar conclusion. line Large corporations and billionaires are behind the current Bitcoin rally. In its analysis, the company asserted that “demand is high when there are (relatively) few bitcoins available for purchase.” The company added: “77% of the mined BTC that has not yet been lost are stored in illiquid wallets. In the past, these wallets have earned less than 25% of the bitcoin they received.”
When digital assets were recognized by mainstream organizations, the reserves left for buyers were only 3.4 million bitcoins.
In addition, Chainalysis compares current data with 2017 data. The data shows that at the end of 2017, the amount of BTC held was almost similar to the current level. Using this data, the thread concludes:
The number of bitcoins available for purchase is similar to that during the 2017 bull market. But in 2017, the wallets that we mentioned lacked liquidity held almost no funds. We think these wallets are mainly long-term investors.
In the remaining topics, Chainalysis pointed out that more and more evidence shows that buying BTC for holding purposes is the reason for the price increase.
Do you agree that China’s liquidity crunch is not the reason for the BTC rebound? Tell us what you think in the comments section below.
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