key takeaways
- All-time high of 12.7 million bitcoins hasn’t moved in over a year
- This translates to two-thirds of the circulating supply
- Only 7% of bitcoins moved in the last month
- History shows that long-term holders thrive as prices decline, which may seem counter-intuitive.
- The real story is a bit more nuanced, as falling trading volume in bear markets provides a hidden variable that affects the data.
One of the interesting things about blockchain is the public availability of all kinds of data about the network.
Much is made of bitcoin’s fixed supply cap, with a final supply of 21 million bitcoins expected to be hit by 2140. Will inevitably squeeze the asset upwards.
looking at the chain here https://coinjournal.net/We noticed an oddity in this data.
Long term holders are on the rise
Despite the bloodshed that 2022 is going to be for cryptocurrency, long-term holders have continued to accumulate. Of the 19.27 million bitcoin currently in circulation, 12.77 million haven’t moved in over a year — the highest ever.
This is a very important number. In the following chart, I plotted these bitcoins against two other categories: first, bitcoins that have moved in the last month (traders), and second, bitcoins that haven’t moved more than a month, but have moved in the past year (traders). medium) -term holder).
Currently, we have 66% of bitcoin undelivered in over a year – again, an all-time high. The previous high was in September 2020 when the mark reached 63%. Prior to this, the previous high was 60% in April 2016.
A further 27% of bitcoins have not moved in the past month, while the remaining 7% can be seen as bitcoin moving around the blockchain in the past month.
Why are long term holders on the rise?
The obvious question is, why? Why are we seeing long-term holders rallying so much when the market is falling?
Well, I decided to chart the percentage of long term holders against the price of bitcoin. And the result is quite interesting – there certainly appears to be at least a moderate inverse relationship between price and long-term holders. That is, when the price falls, the long-term holders go up. Hmm.
But really, it makes sense. As the price drops, the volume and market interest decrease. With this, there is less trading, and by definition there are fewer holders under the one month range.
While the narrative of long-term holders soaking up increasing amounts of the bitcoin supply is often portrayed in a brighter light, I’m not sure that tells the whole story when considering this historical pattern.
Sure, it’s a positive that the number of bitcoins that haven’t moved in over a year is rising, as it shows that these long-term holders haven’t surrendered during the drawdown.
But a healthy trading market and high liquidity are associated with a bull market, which is part of the reason we’re seeing an inverse relationship here. Look No Further Than Trading Volume In 2022, Which Plunged 46% centralized exchange Compared to last year – ie trillions of dollars of activity no longer exists.
“Trade volume has fallen in the crypto space. This has dragged down activity and it is not surprising that the share of bitcoin traded recently is therefore falling. Analysis of long-term holders compared to raw sentiment There is a more subtle issue that ‘long term more bitcoins in wallets are bullish and therefore the price will go up’. This is not what we have seen historically” Max Coupland, director of CoinJournal, said.
I will continue to monitor all on-chain activity, as the market is certainly showing more life in these early stages of 2023, with soft inflation data encouraging the market that we will see higher interest rates sooner than previously thought. Can reduce rates. Hence, it will be interesting to keep an eye on the dynamics on-chain.
But the next time someone apparently bullish declares that there are fewer bitcoins flowing into the markets, maybe remember that the situation is a bit more complicated than that.
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