As 2025 begins, the possibility of bitcoin (BTC) experiencing a significant correction in this first quarter is high. However, declining sell-side liquidity suggests the cryptocurrency could also see further gains in the medium term.

In the latest edition of the Bitfinex Alpha report, analysts revealed that much of the downside pressure predicted for Q1 2025 may have already eased off during bitcoin’s double-digit correction in mid-December. Because liquidity is drying up, BTC may have a more positive quarter.

Bitcoin Sell-side Liquidity Dries Up

According to the report, bitcoin’s sell-side liquidity is falling rapidly to multi-month lows. This tightening of available BTC liquidity can be seen in the Liquidity Inventory Ratio, a metric that measures how long current supply can meet demand.

In October 2024, the indicator showed that BTC supply could meet demand for 41 months; however, it currently hovers around 6.6 months. During bitcoin’s rallies in the first and fourth quarters of 2024, the market also witnessed this type of decline in sell-side liquidity, indicating that such movements coincide with periods of strong market activity.

Bitfinex analysts disclosed that BTC miners are one cohort of market participants driving the plunge in sell-side liquidity. Historically, the market has seen significant spot selling pressure from miners during halving years. This is because these entities offload their reserves and holdings to raise capital to upgrade their machinery and remain afloat as the Bitcoin network slashes their block rewards by half.

However, miners have slowed their BTC sales since April 2024. Their asset flows to exchanges have declined even more rapidly since the start of 2025, indicating that they are selling fewer bitcoins.

HODLing, Not Selling

Noteworthily, miners recorded a slight increase in their flows to exchanges in November 2024 as BTC skyrocketed following the completion of the United States presidential elections, but they have reduced the pace of profit-taking since then.

Bitcoin miners are currently in profit, which has allowed them to operate easily. They choose to hold their BTC rather than sell it.

“Additionally, the Net Unrealized Profit and Loss NUPL) for miners remains very positive, hovering around 0.5, suggesting that miners are still in a strong position, with substantial unrealized profits and a preference to hold onto their BTC at this stage,” Bitfinex added.

Meanwhile, miners are not the only market participants not selling their BTC; long-term holders are also HODLing.