key takeaways
- Two-thirds of the bitcoin supply hasn’t been replenished in over a year
- Metrics for percentage of supply unchanged in 2+, 3+ and 5+ years also at all-time highs
- The average hold period for bitcoin on-chain is 3.8 years
- Despite the thesis that decreasing supply will drive up price, this has not yet been proven to be the case.
capped supply of Bitcoin Has always offered an interesting layer to the analysis of esoteric assets.
Simply put, there aren’t many assets around the world that offer an inexhaustible supply. Truthers argue that this cap will essentially squeeze the price upward through the simple economic principle of supply and demand. That is, assuming demand continues to rise, of course.
Here, we look at this supply, and how many of the total supply of 21 million bitcoin (of which 19.3 million are currently in circulation) haven’t moved in some time.
Bitcoin supply percentage at all-time high in over a year
If one takes the 1+ year mark as a benchmark for long-term holders, this means that an increasing amount of the bitcoin supply is held by long-term investors.
Two-thirds of the bitcoin supply hasn’t moved in over a year, the highest level ever. That is, no buying or selling.
In expanding the time frame, we can see how much of this 67% has been held for even longer. On the chart below, I have plotted the portion of the supply that has been stable over 1+ years, 2+ years, 3+ years, and 5+ years.
The results are interesting. Nearly half the supply – 49.3% – has not moved in more than 2 years. When pushed to 3+ years, that number jumps to 39%. And 28.1% of supply hasn’t moved in 5+ years. The numbers are at an all-time high.
So, Diamond Hand? well sort of. The numbers are certainly large, but there are other variables at play. Most notably the lost coins, of which it is impossible to know exactly how many. Satoshi Nakamoto is estimated to own over one million coins, which is approx. 5% of the supply alone.
Long-term holders are rising despite the market carnage
Nonetheless, it is remarkable for crypto to see such huge numbers after that year. Right now the average hold time of bitcoin on-chain is 3.8 years.
This comes after less than a year Luna’s Fall (May-22) that triggered the bearish crisis that eventually bankrupted hedge fund Three Arrows Capital and sent a wave of contagion throughout the industry.
Things shook up further in June when this contagion claimed crypto lender Celsius. The fallen crypto lender revealed two months ago at the Bitcoin 2022 conference that it held 150,000 bitcoins, which would be 0.8% of the supply.
Unfortunately for investors, court filings by Kirkland & Ellis indicate that the firm lost approximately 62,000 bitcoins, and it is unclear how many they actually have, nor how many the bankrupt firm now holds.
was shocking then The Fall of FTX in November.
But despite this, long-term holders continue to grow, at least if on-chain metrics are to be believed.
Not getting support price due to short supply
But as for the thesis that decreasing supply will push up prices, it hasn’t worked out to date. Bitcoin has collapsed while these metrics have hit all-time highs.
What happens in the long term remains to be seen. Advocates are not wrong when they refer to simple supply and demand. This will undoubtedly help the price, and if long-term holders continue to hold, the drying up of liquidity can only squeeze the price to the upside.
On the other hand, each sale requires a bid order, and these haven’t been coming fast enough over the past two years. As I’ve written repeatedly, bitcoin continues to follow the macro cycle, trading like a highly risk-on asset making fun of Among those who claim it is some kind of inflation hedge. Look no further than recent inflation readings on interest rate policy and the response to Federal Reserve meetings for evidence of this.
Undoubtedly the most important week for BTC this year. Not only are investors watching the Fed, but they are praying for expansionary policy and inflationary pressures⬆️
BTC and S&P500 correlation at all-time high. Fed Indirectly Controls BTC Price
there is an irony somewhere
— Dan Ashmore (@DaniiAshmore) February 1, 2023
It’s a good thing supplies run dry. But until bitcoin sheds its high-risk image, it will continue to trade on the Nasdaq like a leveraged bet. Every asset needs a bid, people, and in times of uncertainty, the market has shown that bitcoin is the last thing investors want to hold.
Time will tell if all of this changes.