On the surface, the market seems to be tossing and turning, but in reality, there are undercurrents at play. Having analyzed crypto assets for many years, I observe that Bitcoin is quietly undergoing a transformation—from a purely speculative asset to a liquidity contest centerpiece.

Recently, I reviewed order book data from exchanges and discovered a perplexing fact: Bitcoin's liquidity is rapidly drying up. Compared to the order depth during the 2021 rally, it now only retains about one-third of that. This may sound insignificant, but in actual trading, it’s a different story—a large order can cause the price to jump several points.

Ironically, all this is happening at a time when Bitcoin’s 30-day annualized volatility hits a six-year low. The market seems to be brewing something, and the feeling of "calm before the storm" is growing stronger.

**Where Has the Liquidity Gone?**

When people talk about Bitcoin liquidity, they usually focus only on candlestick charts. But the problem is far more complex—the market depth is evaporating at an invisible speed.

The data is clear: in early December this year, Bitcoin’s price fell from the $126,000 high set in early October to below $89,000 in just over a month, a decline of over 30%. It sounds severe, but this is just the tip of the iceberg.

The real issue lies deeper. The composition of liquidity is changing behind the scenes. Recently, an institutional friend of mine complained that they wanted to build a $50 million Bitcoin position all at once, but found they couldn’t do it quietly—slightly larger orders would impact the price. This is a true reflection of the liquidity crisis.

The effective supply in the market is actually very tight. Long-term holders have "frozen" their Bitcoin, and an estimated millions are stored in deep cold wallets. The amount of coins genuinely willing to circulate in the market is painfully small.