Bitcoin facing a liquidity crisis? On-chain indicators raise alarms, ETF fund fluctuations become a hidden danger.

Bitcoin has been experiencing a continuous downward movement recently, with a weekly decline of 3.7%, currently priced at $114,420 and trapped in a sideways situation. On-chain analysis reveals three fatal flaws: the liquidity inventory ratio has plummeted to a three-month reserve, significant fluctuation of ETF funds has weakened support, and "smart wallets" show weak accumulation. CryptoQuant special analyst Arab Chain points out that insufficient market depth allows small sell orders to trigger a flash crash; if institutional demand does not recover, Bitcoin may continue to experience weak fluctuations. This article will analyze the impact path of on-chain liquidity alerts on coin prices.

Liquidity Exhaustion: Insufficient Market Depth Triggers Flash Crash Risk On-chain data platform CryptoQuant's guest analyst Arab Chain's latest research report points out that the Bitcoin market is facing a serious liquidity crisis:

• Liquidity Inventory Ratio big dump: Since mid-July, this indicator has plummeted sharply, with the available supply on exchanges reduced to about 3 months of reserves.
• Supply and Demand Structure Imbalance: Despite reduced selling pressure, the absence of institutional and ETF incremental funds has led to the abnormal phenomenon of "decreased supply but falling coin prices." Arab Chain warns: "When the market depth is insufficient and there is a lack of large buy orders, even small sell orders can trigger severe price fluctuations." This fragile liquidity state highly matches the characteristics of Bitcoin's long-term correction periods in history.

ETF funds fluctuate significantly: Institutional demand stabilizes The Bitcoin spot ETF, as a key demand engine, has shown concerning performance recently:

• Capital flow is highly volatile: presenting a sawtooth pattern of "a significant net inflow on a single day followed by a massive outflow"
• Stabilizer function failure: Unable to form sustained buying support, weakening the market's ability to resist falls. Especially during the US trading hours, ETF fund flows have become an amplifier for Bitcoin's short-term fluctuations rather than a stable anchor, leading to repeated pressure on the key support zone of $114,000.

"Smart money" accumulation is weak: bottom support is thin On-chain data further reveals the essence of market weakness:

• High-value address silence: Large wallets regarded as "smart money" only moderately increased their holdings during the pullback.
• Accumulation speed lags: The slow accumulation of long-term holders is unable to offset the immediate selling pressure. The lack of accumulation momentum has resulted in each rebound facing the dilemma of "high positions lacking support orders," forming the technical characteristics of a bear market with "increased volume during declines and decreased volume during rebounds."

Conclusion: The current predicament of Bitcoin is essentially a triple strangulation of liquidity crisis, unstable institutional demand, and lack of accumulation momentum. The on-chain liquidity inventory ratio has hit a three-month low, akin to walking on the edge of a cliff—any slight disturbance could trigger a flash crash. Short-term resolution requires meeting two major conditions: ETF funds must restore stable net inflows, and on-chain large transfer monitoring should show that "smart wallets" are accelerating accumulation. Investors should closely monitor CoinGlass exchange reserve data and Farside Investors' ETF fund flow reports. If the support level of $114,000 is broken, precautions should be taken against the risk of a rapid drop to the psychological level of $110,000. Market recovery takes time, and strict position control remains the survival rule of the moment.