The market seems turbulent, but in fact, there are undercurrents; Bitcoin is undergoing a silent revolution from a speculative asset to a core of liquidity.
The Bitcoin market is undergoing an astonishing transformation: by December 2025, the actual circulating Bitcoin will be less than 18%, while the depth of exchange order books is only 35% of the peak in 2021. This means that although Bitcoin's total market value is enormous, the truly tradable liquidity has dwindled to a shocking level.
This scarcity of liquidity sharply contrasts with the high volatility of Bitcoin prices. Currently, the 30-day annualized volatility of Bitcoin is only 18%, hitting a six-year low, as the market seems to have entered a state of 'calm before the storm.'
01 The Truth About Liquidity Exhaustion
When we talk about Bitcoin liquidity, most people focus on price rather than depth. In fact, the current Bitcoin market is facing a serious liquidity crisis.
As of December 1, 2025, the total amount of Bitcoin mined has reached 19.9558 million coins, close to the 21 million cap. However, the actual circulating Bitcoin only accounts for a small portion of it.
Approximately 3.68 million Bitcoins (18.44%) are permanently lost, mainly due to lost private keys and long-dormant addresses.
Long-term held Bitcoin: Satoshi's wallet holds approximately 1.117 million coins (5.6%), plus national reserves and institutional holdings exceeding 1.8 million coins (9%)
Active circulating Bitcoin: only 3.3 to 3.6 million coins (16.5%-18%), referring to Bitcoins that have been traded at least once in the past 90 days.
Even more concerning is the liquidity situation on exchanges. At a price depth of +/-2%, only 18,500 Bitcoins are available for trading (0.093% of total supply). At a price depth of +/-5%, it is less than 37,200 coins (0.186%).
This means that once a large buy order occurs, market prices may quickly rise or even skyrocket.
02 The triple drivers of liquidity transformation
Macroeconomic liquidity: The ebb and flow of global capital
The correlation between Bitcoin and global liquidity is increasing. Since 2014, the correlation between Bitcoin and the growth of global M2 money supply has been around 0.5, and changes in fiat currency liquidity largely explain its long-term returns.
The market performance in 2025 perfectly illustrates this. When Trump's unexpected tariff remarks triggered global market turbulence, Bitcoin began its decline. On November 17, Bitcoin fell below $94,000, erasing all gains for the year.
This correlation makes Bitcoin a 'precise sensor' of global liquidity. Traditional risk assets and safe-haven assets decline in sync, signaling a systemic contraction of market liquidity. As Ding Yuan, director of the New Fire Research Institute, pointed out, this usually occurs in extreme environments where funds are generally tightening.
Institutionalization process: A paradigm shift from speculation to allocation
The participation of institutional investors has changed the essential structure of Bitcoin liquidity:
Maturity of ETF channels: Global Bitcoin ETF net inflows reached $6 billion in 2025, pushing total AUM above $125 billion.
Institutional allocation model shift: from 'impulsive bottom-fishing' to 'sustained allocation', with ETF tracking error controlled within 0.3%
Corporate balance sheet allocation: By 2025, digital asset treasury companies have invested at least $42.7 billion, with more than half of the trading activity occurring after the third quarter.
Institutionalization brings not only capital but also a fundamental change in liquidity structure. A market driven by traditional retail investors exhibits high volatility and turnover, while the institutional market is more stable and focuses more on long-term value storage.
Miner behavior: Liquidity pressure valve on the supply side
Miners, as the cornerstone of the Bitcoin ecosystem, have a significant impact on liquidity. Currently, miners are under tremendous pressure:
Hash rate hits a record high: network hash rate surpasses 750 EH/s, but unit hash rate income drops to 0.0003 BTC/EH, plummeting 65% from the peak in 2024.
Survival dilemma: Miner electricity costs account for over 80%, with a gross margin of -15%, leading to the shutdown of 30% of small and medium-sized mining operations.
Forced selling: Miner reserves have dropped to 182,000 coins (the lowest since 2010), with a net sell of 87,000 coins in Q3 2025.
Continuous selling pressure from miners provides bottom liquidity to the market but also acts as an accelerator during price declines. When miners are forced to sell Bitcoin due to declining profitability, it further exacerbates market downward pressure.
03 Core Metrics of Market Maturity
The liquidity situation of Bitcoin reflects the market maturity of this asset class. I believe that the quality of liquidity is more important than its quantity.
Traditional financial systems measure liquidity through indicators such as bid-ask spreads, market depth, and execution speed. Analyzing the Bitcoin market along this framework:
Firstly, the bid-ask spread has significantly narrowed. As the professionalism of market makers improves and arbitrage mechanisms are perfected, the price differences among major exchanges have dropped from high percentage points in the early days to currently below 0.1%.
Secondly, market depth shows structural imbalances. Although the order book depth is only 35% of the peak in 2021, the depth and elasticity of the institutional over-the-counter (OTC) market have significantly improved, compensating for the shortcomings of the retail market.
Finally, execution speed has been institutionalized. Traditional financial-grade trading infrastructure has spread in the cryptocurrency space, allowing large transactions to be completed quickly with minimal market impact.
These changes indicate that the Bitcoin market is transitioning from adolescence to maturity. A decrease in volatility is not a signal of market death but a manifestation of market growth.
04 Future Outlook: Three Paths of Liquidity Evolution
Based on the current liquidity situation and market demand, I believe the Bitcoin market may face three evolutionary paths:
Path One: Structural Bottom Oscillation (Probability: 50%)
In 2026, Bitcoin may continue to oscillate in the range of $80,000 to $95,000. An annualized growth rate of 15% in ETF AUM and a monthly net inflow exceeding $300 million provide support, but the wave of miner debt maturities creates pressure. In this scenario, liquidity remains tight but stable, preparing for the next rally.
Path Two: Resonating in sync with risk assets (Probability: 30%)
If the Federal Reserve cuts interest rates below 3.5%, triggering a global liquidity inflection point, Bitcoin will rise in sync with traditional risk assets. Referencing the 50 basis point rate cut by the European Central Bank in September 2025, BTC surged 12% within 48 hours, outperforming gold by 8 percentage points.
Path Three: Institutionalized 'Ceiling' (Probability: 20%)
As regulatory frameworks like MiCA 2.0 are implemented, Bitcoin's volatility may drop below 15%. When ETF holdings exceed 20% of circulation, the probability of single-day volatility exceeding 10% will decrease by 50%. In this scenario, Bitcoin becomes a truly mainstream asset, but the space for excess returns narrows.
Liquidity is the oxygen of the market, invisible yet essential. The current tight liquidity in Bitcoin is the inevitable result of institutional capital accumulation and long-term holders locking supply. Outside the glass window are the splashes of price fluctuations, while inside the glass window, structural changes in liquidity depth are occurring.
As the Wall Street joke goes: 'Buying Bitcoin now is not betting that it will rise to $225,000, but betting that you understand the next liquidity inflection point before others.'
Dear readers, how do you view the current state of Bitcoin liquidity? Feel free to share your opinions and observations in the comments section.
Follow me@崎哥说币 #比特币流动性 $BTC
