In recent days, Bitcoin has seen a slight drop before its halving, but it's now back around $70,000 after finding support at its previous peak of $69,000. However, the world's top cryptocurrency is grappling with a significant liquidity crunch due to growing interest. This shortage of available Bitcoin for trading, spurred by factors like institutional investments and diminishing sell-side availability, could potentially drive its price even higher.

As demand for Bitcoin skyrockets, concerns arise over its dwindling liquidity. Experts note a substantial surge in monthly Bitcoin demand, jumping from 40,000 BTC at the year's outset to an impressive 213,000 BTC presently. This heightened demand is fueled by increased interest from institutional investors and a growing number of accumulation addresses. Yet, this surge in demand is not met with a corresponding increase in available Bitcoin for sale.

Two primary factors contribute to Bitcoin's liquidity crisis. Firstly, institutional investments, particularly through exchange-traded funds (ETFs) in the United States, have seen a notable uptick in Bitcoin holdings, signaling heightened interest from institutional investors. Additionally, large investors, or "whales," have significantly increased their Bitcoin holdings, exacerbating the shortage of available coins.

Concurrently, the sell-side liquidity of Bitcoin is on a downward trajectory. Key entities holding Bitcoin have markedly reduced their holdings, reaching historic lows. This imbalance between surging demand and diminishing sell-side liquidity has led to a severe liquidity crisis, with estimates suggesting that current liquidity levels may only meet demand for the next twelve months.

Despite the challenges posed by the liquidity crisis, there's a silver lining for Bitcoin investors. Analysts predict that prices may rise in the long term due to a potential supply-demand imbalance. This is further supported by Bitcoin's exclusion from exchanges outside the US, further limiting available supply. As global liquidity dwindles to only six months of demand, scarcity could drive further price hikes.

Currently, Bitcoin is trading at $70,306.29, experiencing a slight 0.25% decrease in the last 24 hours. Although trading volume has surged by 14.235% to $35.88 billion, indicating reduced trading activity, Bitcoin has seen a 13.47% increase in value over the past week and a 24.54% increase over the past month. Despite being 4% lower than its all-time high of $73,750.07, reached on Mar 14, 2024, its year-to-date growth of 152.80% suggests resilience and potential for further growth.

In conclusion, as Bitcoin grapples with a severe liquidity crisis amid soaring demand, investors should closely monitor market dynamics. Despite the challenges posed, there's potential for price increases driven by decreasing sell-side liquidity. By understanding the factors behind demand, the impact of diminishing sell-side availability, and the potential for price growth, investors can strategically position themselves to capitalize on Bitcoin's liquidity challenges and potentially profit from future price increases.