On-chain data shows: Millionaires flock to Bitcoin – but there’s not enough to go around

Demand for Bitcoin has increased many times over in 2020. And on-chain data shows that the asset’s limited supply may be causing a rush.

The Bitcoin FOMO train
Bitcoin, the world’s largest cryptocurrency, experienced a surge in demand last year amid a gloomy economic outlook, worries about dollar inflation, weakened fiat currencies, incessant money printing and low yields on traditional assets.

The rally even ensured that institutional players took notice Bitcoin Supersplit of the asset as it broke through its previous all-time high of $19,800, rising to as high as $41,750 in December 2020. Some of them multi-billion-dollar funds like Guggenheim Partners, which filed its interest in BTC with the US Securities and Exchange Commission last year.

Others took the plunge. Paul Tudor Jones, billionaire investor and head of Tudor Investments, put nearly 2% of his capital into the asset class, saying it was a „great speculation“, and the „fastest horse“ among all other assets on the open market.

Technology firms also invested briskly. Fintech service Square, owned by Bitcoin advocate and Twitter founder Jack Dorsey, invested $50 million of its funding in BTC, saying it was a tool of „economic empowerment and offers the world a way to participate in a global monetary system.“

But that was still small compared to business intelligence firm MicroStrategy’s bitcoin purchase. Starting in August 2020, the firm built a $1 billion position in Bitcoin. The largest purchase came in December, when the firm raised $650 million in a convertible note and used the proceeds to buy more Bitcoin.

What on-chain data says
Despite the volumes, institutional interest in bitcoin is only just beginning. On-chain analyst Willy Woo currently writes in a tweet that the „whale spawning season“ is here – showing a record number of large bitcoin transactions.

Woo goes on to write:

„The world has 47 million millionaires, 71% of them live in the US or EU, there are only 14.9 million BTC in circulation, and only 4.1 million BTC are liquid and can therefore be bought.“

Such a liquidity shortage on the sell side likely caused the record buying of bitcoin last month – which in turn drove the asset’s price to over $23,000 and beyond, Woo said.

According to Woo, the data would show that the supply of the 4.1 million „liquid“ coins (or those that were available for sale) has steadily declined amid the money printing and stimulus rounds. An observation that suggests the market is running out of sellers.