Sygnum: Bitcoin Liquidity Drought Could Spark Fresh Swings as Next Market Cycle Takes Shape

Bitcoin’s Safe-Haven Appeal Strengthens Amid U.S. Treasury Volatility and Shrinking Supply, Says Sygnum Bank

Amid growing turmoil in U.S. Treasury markets and a weakening dollar, Bitcoin is increasingly viewed as a safe-haven asset, according to Sygnum Bank’s latest market report.

The bank highlights a sharp reduction in Bitcoin’s liquid circulating supply — down roughly 30% over the past 18 months — which, combined with sustained demand, may lead to significant price volatility ahead. “With liquid supply tightening and demand accelerating, Bitcoin is positioned for potential upward price shocks,” analysts said.

Key factors behind rising demand include the surge of inflows into Bitcoin ETFs and governments’ growing openness to holding Bitcoin reserves. This dynamic has sparked speculation of a “demand shock,” where buyers face a shortage of available coins.

Since late 2023, more than one million BTC have been pulled off exchanges, primarily by ETF investors and corporate treasuries accumulating for long-term holding. This depletion in liquidity is pressuring traders who need quick access to Bitcoin during price swings or for short-covering.

Sygnum also points to macroeconomic headwinds boosting Bitcoin’s hedge appeal. Declining U.S. Treasury prices and rising federal debt are pushing investors back towards traditional safe havens like gold — and increasingly, Bitcoin.

Geopolitical shifts are adding momentum too. Three U.S. states have enacted Bitcoin reserve legislation, with New Hampshire already implementing its law and Texas expected to follow. Internationally, countries including Pakistan and political leaders in the U.K. are exploring Bitcoin reserve allocations — moves that, while currently symbolic, could translate into significant future demand.

Overall, Sygnum believes the crypto market cycle has considerable runway left, as supply constraints and growing demand set the stage for further volatility and potential gains.