Bitcoin Faces Reduced Downward Pressure as Sell-Side Liquidity Diminishes

Bitcoin's price may be facing a period of stability, with analysts suggesting that the cryptocurrency has likely passed the worst of its downward pressure. According to a recent market report from Bitfinex analysts, the sell-side pressure on Bitcoin is "shrinking at a rapid pace," potentially signaling a more favorable short-term outlook for the digital asset.

Shrinking Sell-Side Liquidity Signals Bullish Potential

Bitfinex analysts highlighted a significant drop in Bitcoin's sell-side liquidity, meaning that the available supply of Bitcoin for sale on exchanges has dwindled substantially. As of January 6, the analysts noted that Bitcoin's liquidity inventory ratio—essentially measuring how long the current supply can meet demand across exchanges—has plummeted from 41 months in October 2024 to just over 6.5 months.

This decline is considered a positive development for Bitcoin traders. When the supply of an asset tightens, it often creates a sense of scarcity, which can lead to higher demand and potentially drive prices upward. Bitfinex analysts observed that similar tightening of liquidity coincided with Bitcoin rallies observed in both Q1 and Q4 of 2024.

Price Action and Market Sentiment

At the time of publication, Bitcoin was trading at approximately $96,880, according to CoinMarketCap. On January 6, Bitcoin briefly surpassed the $100,000 mark for the first time since December 20, but it quickly pulled back to around $96,261 within 24 hours. Despite this minor fluctuation, the broader sentiment in the market appears to be more optimistic than before.

Pseudonymous crypto trader Daan Crypto Trades remarked on January 7 that the short-term price action would be intriguing, acknowledging that markets tend to be volatile around the end and start of the year. “Overall, the market still remains choppy, which is usually the case near the end and the start of the year,” Daan wrote in a post on X.

Miners Hold More Bitcoin Amid Bullish Trends

Bitfinex analysts also pointed to a decline in Bitcoin flows from miners to exchanges in 2025, suggesting that miners anticipate further price increases. With Bitcoin prices trending upwards, miners are operating profitably and have opted to hold on to their BTC rather than selling it, signaling confidence in the market's continued bullish momentum.

This pattern of holding rather than selling could further tighten Bitcoin's available supply, enhancing the scarcity effect that often drives prices up. Analysts have previously forecasted a potential Bitcoin price range of $145,000 by mid-2025, with the possibility of reaching $200,000 under more favorable market conditions.

Slowing Demand and Falling Trading Volume

However, not all indicators point to a clear upward trend. Glassnode's lead analyst, James Check, reported on January 7 that while sell-side pressure from existing holders is dissipating, fresh demand for Bitcoin has also shown signs of tapering off. Check pointed out that spot trading volume has fallen by 53% since November 2024, which could suggest a slowdown in market activity.

Despite the bullish sentiment surrounding Bitcoin's price in recent months, with a 46% surge between November 5 and 23, 2024, reaching $99,006 and surpassing $100,000 on December 5, there are concerns about a decrease in new demand as 2025 progresses. With spot trading volume declining, Bitcoin's price could face some resistance in the short term, even as sell-side pressure eases.

Conclusion

In summary, Bitcoin's immediate downward pressure appears to have abated, thanks to a sharp decline in sell-side liquidity and reduced selling activity from miners. However, the market is not without its challenges, as demand indicators have started to show signs of slowing. While Bitcoin's price has rebounded in recent weeks, the future trajectory remains uncertain, and it will be essential to watch how the market responds to evolving conditions in 2025.