Ultimate Resource On Large And Small Bitcoin Hodlers
Over 55% of Bitcoins currently sit in wallets that have balances upwards of 200 coins – worth over $1Mn at any point in time within the last 11 months when the price of Bitcoin breached the $5k mark. Ultimate Resource On Large And Small Bitcoin Hodlers
And impressively, 1/3 of the Bitcoins that are sitting in these wallets, have never made an outgoing transaction, which, outside of exchange wallets could indicate either lost private keys, lowering real supply, or a very strong resolve by cryptocurrency believers.
Long-term investors are keeping the faith in the king of cryptocurrencies despite the bears market in 2018. Data crunching by Diar shows that the majority of circulating Bitcoins, 55%, are sitting in wallets that are valued north of $1.3Mn at current prices.
At pixel time, over 87% of Bitcoins are stored in wallets that are above 10 Bitcoins ($60K+) – the total value just shy of $100Bn of the total market capitalization. These coins sit in only 0.7% of all Bitcoin addresses.
Accounting for wallets with over 100 coins ($640K+), this number drops to under 0.1% of all addresses, but represent 62% of all outstanding Bitcoins.
The top-heavy ownership of Bitcoins of course does not indicate a select number of wealthy individuals solely however, as the largest wallets are owned by cryptocurrency exchanges that are holding the coins on behalf of clients. In fact, 3.8% of the total bitcoin supply are currently sitting in the top 5 wallets that are known to be managed by major exchanges – approx. $4.2Bn in value.
BALLERS BE BALLING, HODLERS BE HODLING
An amazing 42% of Bitcoins held in such investment wallets (above 200 BTC) made no outgoing movement during the price peak in December 2017 – and sat in wallets before the markets saw the near $20k BTC. And 27% of these Bitcoin wallets have continued to add more coins to their stash since then.
TWO SIDES TO A BITCOIN TOO
An analysis earlier this year by blockchain analytics firm Chainalysis, however, places a whopping $30Bn Bitcoin sell off between December 2017 and April 2018. The report placed, back in April, 1/3 of Bitcoin supply in the concentrated hands of 1600 individuals. But there is a cherry on top for long-term investors. Chainalysis places the possibility of 30% of Bitcoin supply to be lost, and unmined. Diar recent analysis is inline with this estimate.
Note: The wallets may have never made an outgoing transaction since November 2017, however current balances reflect new wallets, as well as Bitcoins added to the wallets.
25% of total Bitcoins sit in wallets that were created before the Price Peak and have not made any outgoing transactions. Some wallets may be managed by exchanges.
Updated 4-23-2019
Chainalysis Adds Real-Time Transaction Monitoring for 4 More Cryptos
Blockchain compliance startup Chainalysis has added four more cryptocurrencies to its real-time transaction monitoring tool.
The newly supported coins are Binance’s native token Binance Coin (BNB) and three stablecoins – Gemini dollar (GUSD), Tether (USDT) and Circle’s USD Coin (USDC) – Chainalysis said Wednesday.
“As a New York trust company, we are required to monitor transactions onto and off of our platform,” said crypto exchange Gemini’s chief compliance officer, Michael Breu. “Automated solutions like Chainalysis help us fulfill our regulatory obligations.”
The additions mean Chainalysis’ anti-money laundering compliance solution, Chainalysis KYT (Know Your Transaction), now supports a total of 10 cryptocurrencies. The solution already supported six cryptocurrencies: bitcoin (BTC), ether (ETH), bitcoin cash (BCH), litecoin (LTC) and the stablecoins TrustToken’s TrueUSD and Paxos Standard (PAX).
The support of additional cryptocurrencies comes in anticipation of regulatory guidance from the Financial Action Task Force (FATF), a global money-laundering watchdog, which will provide clarity on how cryptocurrencies should be regulated over 180 countries, Chainalysis said.
The startup’s co-founder and chief operating officer, Jonathan Levin, told CoinDesk:
“Chainalysis is prepared to equip businesses with automated transaction monitoring for currencies beyond bitcoin. We expect that the launch of these multiple currency capabilities will help shape FATF guidance on the sector and help move away from technically infeasible solutions to more pragmatic recommendations.”
With Chainalysis having recently rebuilt its technology to scale and support more blockchains, the firm will be able to add new cryptocurrencies more quickly, Levin added in the announcement.
The startup’s blockchain investigation tool, Chainalysis Reactor, now also supports the same 10 cryptocurrencies, which it says represent 85 percent of the top 25 coins by trading volume.
Just last week, Chainalysis published a public comment letter in response to a draft recommendation by the FATF, saying that it is unrealistic and potentially harmful for the crypto industry to expect exchange platforms to send know-your-customer (KYC) information to recipient platforms with every transaction.
Founded in 2014, the firm recently raised a total of $36 million in a multi-stage Series B funding backed by notable investors, including Japan’s largest bank Mitsubishi UFJ Financial Group (MUFG) and venture capital firm Accel Partners.
Updated: 12-2-2019
‘Hodlers Are Insane’ — 64% of Bitcoin Supply Has Not Moved Since 2018
Over 60% of the total Bitcoin (BTC) in circulation has not left its wallet in more than a year, highlighting demand among investors.
That was the conclusion of analyst Rhythm, who uploaded statistics about Bitcoin network activity on Dec. 2.
BTC Investors Shun Risk And Short-Term Gains
Of the roughly 18.08 million Bitcoins which have been mined, 11.58 million — or 64% of the supply — has stayed in the same wallet since 2018.
The figure is striking as during that time, BTC/USD expanded from $3,100 last December to 2019 highs of $13,800 just six months later.
Subsequently, markets reversed downward, shaving 52% off the highs to reach local lows of $6,500 on Nov. 25.
“Hodlers of last resort are insane,” Rhythm summarized.
According to the data, the amount of dormant BTC as a percentage of the total supply has sharply increased in recent years. The trend has remained intact during both bull markets and bear markets, signaling a desire among investors to save rather than spend regardless of profitability.
Hard Money Mentality
Such a trait fits Bitcoin’s characteristics as hard money: a currency with a fixed supply and emission schedule which no central authority can manipulate.
As Cointelegraph recently noted, the cryptocurrency’s proponents have long drawn the distinction between its characteristics and those of “easy money” such as fiat currency.
A currency, which can have its supply manipulated fits an economic system that incentivizes spending and borrowing while discouraging saving. As Saifedean Ammous summarized in his popular book, “The Bitcoin Standard,” consumers feel the urge to spend money sooner, as it loses its value in the long-term due to government and central bank interference.
Bitcoiners, by contrast, continue to exhibit a so-called “low time preference” economically — saving for the future, understanding that it is more profitable to do so than purchase as much as possible as soon as possible.
Updated: 12-18-2019
Bitcoin ‘UTXOs In Loss’ At Record Highs Amid Price Sell-Off
A key metric is hovering at record highs, suggesting investors are likely holding bitcoins even when deep in the red.
The number of unspent transaction outputs (UTXOs) in loss rose to all-time highs above $45 million on Dec. 17, representing a 578 percent rise from the July 1 figure of $6.69 million, according to on-chain market intelligence firm Glassnode.
A UTXO is basically leftover bitcoins after a transaction. It’s a little bit like getting back change when paying for something in cash using large bills.
For example, Alice has 10 bitcoins and needs to pay three BTC to Bob, a merchant. Alice can’t just send out three BTC and hold the rest. Instead, she will have to spend 10 BTC, of which three BTC will be sent to Bob and the remaining seven BTC will be sent back to the address she controls. These seven bitcoins are UTXOs and can be used as inputs in another transaction.
A loss-making UTXO is the one whose price at the time it was created was higher than the current price.
The fact that the UTXO-loss metric is hovering at record highs following a 50 percent price slide from June highs above $13,800 to recent lows near $6,500 indicates investors are likely holding on to their loss-making outputs, according to Alex Benfield, a crypto asset analyst at Digital Assets Data.
“There have been 438 days where someone could have bought bitcoin and would currently be at a loss at the time of writing,” Benfield told CoinDesk in an email. “About half of these days took place in 2019 (dating back to May 12) and would represent short-term holders of less than one year. The other half dates back to as early as Nov. 3 of 2017 and are over two years old, representing long term-holders. Any bitcoin purchased during one of the days where the price was higher than it is today contributes to the UTXO-loss metric, which will continue to reach new all-time highs if the price continues to drop while buyers hold on to their bitcoin.”
Meanwhile, Yan Liberman, co-founder of research boutique Delphi Digital, said UTXO’s in loss can represent long-term holders and cited bitcoin’s market value to realize value (MVRV) ratio as a better way to gauge the amount of UTXOs in loss.
The MVRV ratio is calculated by dividing market value by realized value. While the market value is found by counting all mined coins equally at current market price, the realized value represents the sum of all coin values based on the last time they moved (sum of all UTXOs).
Thus, a falling ratio implies there are large amounts of UTXOs in loss, Liberman told CoinDesk. Bitcoin’s MVRV ratio currently stands at 1.23, having peaked at 2.38 in June, according to data source woobull.com.
Also, there is evidence that long-term holders haven’t been selling. The portion of supply held for at least 12 months started the year at 55.6 percent, peaked at the end of April at 60.8 percent, and sat at almost 59 percent at the end of November, according to Delphi Digital.
Further, the portion of supply held for more than two years stood at an all-time high of 40 percent at the end of November, having started the year at 34.6 percent.
All in all, there is strong reason to believe that “HOLDing” has driven the UTXO-loss metric to record highs.
The drop in the number of transactions seems to have played a role as well, according to Glassnode.
As shown in the chart above, the seven-day moving average of the on-chain transactions has declined from the high of 378,808 seen at the end of June to lows near 304,000. Fewer transactions mean fewer UTXOs have been created during the price slide.
Updated: 1-8-2020
10M Bitcoins Haven’t Moved In More Than a Year, Highest Since 2017
“HODLing” has returned to a major milestone: The total number of bitcoins that haven’t changed hands in more than a year has crossed the 10 million mark.
About 10.7 million bitcoins haven’t moved in more than 12 months, according to Digital Assets Data, a fintech company building crypto data feeds.
Considering the total number of bitcoins in circulation is 18.14 million, this also means nearly 60 percent of the coins remained dormant and only 40 percent participated in the price action seen in 2019. The percentage of bitcoins lying dormant for over a year is at its highest level since early 2017.
“The sheer size of unmoved bitcoin is definitely a sign of the developing community of HODLers,” Kadan Stadelmann, chief technology officer at Komodo Platform, told CoinDesk.
The top cryptocurrency witnessed substantial swings last year, rising from $3,693 to $13,879 in the first six months only to fall back to $7,179 by mid-December. Thus, bitcoin just about doubled last year despite the brutal sell-off in the second half.
Even so, a large number of bitcoins remained inactive, possibly because investors are expecting a significant price rise following the mining reward halving, due in May. The process, repeated every four years, reduces block rewards by half in order to keep inflation under check.
However, if the market doesn’t live up to lofty expectations, some selling could be seen, Stadelmann said. In that case, the sum of bitcoins lying dormant would drop.
HODLers Underwater
Another strong reason for the growing number of bitcoins lying dormant could be that a sizable portion of HODLers are doing so at a loss and are holding on to their investments.
“Many investors are potentially still underwater with bitcoin that was purchased at higher prices in 2017 and 2018,” said Kevin Kaltenbacher of Digital Assets Data.
Prices higher than the 2019 high of $13,879 were observed during the December 2017-February 2018 rally, and many investors may have acquired coins during that bull market frenzy.
However, the fact these investors have not sold indicates they are likely betting on long-term growth prospects.
Updated: 4-23-2020
Bitcoin Investors Hodl $530M More BTC Each Day As Halving Nears — Data
Roughly 75,000 BTC is being added to long-term positions daily, according to figures tracking investor behavior.
Bitcoin (BTC) hodlers are accumulating more coins every day than any time in over a year, as crypto investment looks increasingly attractive.
According to data from monitoring resource Glassnode on April 23, this month saw a significant increase in BTC positions.
Hodler Position Change Hits 75,000 BTC Per Day
Known as Hodler net position change, the data shows that long-term Bitcoin investors are in bear market mode, seeking to buy up coins at what they consider to be a bargain price point.
The metric originally came from Bitcoin alpha fund Adamant Capital, which equated the activity behind it roughly to insider buying and selling.
“We see that significant quantities were cashed out during bull markets of Bitcoin, and net new positions were accumulated by HODLers in bear phases,” Adamant explained in a blog post last year.
At current rates, hodlers are adding in excess of 75,000 BTC to their positions each day. The data may include exchange wallets, which can only be excluded if they are known to belong to a specific entity.
Halving Awareness Heats Up
The impressive figures build on previous insights from Glassnode into investor behavior changes. As Cointelegraph reported, whales are also stocking up on coins, while wallet balances of 1 BTC or more are on the rise.
According to Google Trends, meanwhile, there is a keen awareness among internet users of Bitcoin’s upcoming block reward halving and the potential price upside that could result.
Earlier this week, exchange Coinbase said that it had seen a spate of Bitcoin buys equal to $1,200 — the amount of the stimulus checks currently being issued to Americans by the United States government.
Updated: 4-24-2020
Wallets Hodling 0.1+ BTC Hit All-Time High As Halving Looms
The record number of Bitcoin hodlers are hedging their savings against central banks.
The number of addresses holding at least 0.1 Bitcoin (BTC) has exceeded the 3-million mark for the first time as hodlers brace for the halving.
Analysts who adhere to the efficient markets hypothesis, believe that the halving is already priced in and will not significantly affect the price.
However, there are those who believe that markets are irrational and that the market dynamics is better described by behavioral economics instead — the field pioneered by Danny Kahneman, a psychologist, who received a Nobel Prize in economics for his groundbreaking work. At least, for the moment, the latter may have an upper hand.
Hedge Against Fiat?
Interestingly, even the “halving” of the price on Black Thursday, has not slowed down the growth of addresses holding at least 0.1 BTC. While those holding 0.1 BTC cannot be identified as “whales”, this growth likely reflects the greater adoption and accumulation by retail investors.
It also comes at a time when central banks around the world are flooding the economy with money. This may be an attempt on the part of the public to hedge their savings against the debasement of fiat currencies.
Though some find it undeniable that recent socio economic events will have a favorable effect on Bitcoin, only time will tell whether it is setting up for a 2017-like bull run.
Updated: 6-19-2020
Bitcoin Hodlers Bought BTC 90% of 2020 As Halving Spawns New Whales
Whale numbers have gone up 2% since the halving, while hodlers have added 233,000 BTC to their positions since the year began.
Bitcoin (BTC) investors are treating 2020 as a major accumulation opportunity, the latest data shows.
Statistics from on-chain monitoring resource Glassnode reveal that June’s BTC price action is even creating more new whales.
Bitcoin Whales Spike 2% Since Halving
Analyzing the number of entities with holdings of 1,000 BTC or more, both May and June saw an increase of roughly 1.5%.
The number of whales, as defined by this metric, now stands at 1,840, has sharply increased in the week following the halving last month.
Zooming out, meanwhile, Glassnode’s “Hodler net position change” chart shows that out of the first 170 days of 2020, Bitcoin investors were accumulating on 154 of those days.
Despite wildly varying price action, the mood among long-term investors clearly points to a desire to save, not trade or spend their coins. The net increase in their positions amounts to around 233,000 BTC.
“Long-Term Bullish Trend”
The trend corresponds to other hodler data previously reported by Cointelegraph. In particular, despite the price volatility this year, more than 60% of the Bitcoin supply remained stationary.
For more than a year, the majority of the supply did not move, a phenomenon that began in December 2019 and has remained.
“Long-term bullish trend for Bitcoin,” fellow monitoring resource Double-U summarized about the whale numbers.
In late May, one analyst went as far as to suggest that Bitcoin’s “accumulation phase” had in fact last far longer — since the all-time highs of $20,000 in December 2017.
Short-term price performance has nonetheless appeared to worry some. Exchange reserves began increasing this week following a long downtrend, in line with volatility, which saw Bitcoin briefly fall below $9,000.
Updated: 6-20-2020
11.4M Bitcoin Held As Long Term Investment
11.4 million Bitcoin is held by long term investors, diminishing the tradeable supply to only 20% of the total Bitcoin supply.
According to Chainalysis, the vast majority of Bitcoin (BTC) is held as long term investment, with 60% held by licensed custodians.
Digital Gold
The company concluded that the breakdown of Bitcoin’s supply makes it similar to gold, supporting the asset’s status as digital gold. They clarify, however, that it is the 3.5 million BTC that is actively traded which supports the price:
“But this digital gold is supported by an active trading market for those who prefer to buy and sell frequently. The 3.5 million Bitcoin used for trading supplies the market, and, in interaction with the level of demand, determines the price.”
Chainalysis defines long term investors as those who have never sold more than 25% of their holdings, noting that such users have often held their assets for many years.
340,000 Weekly Traders
Further analyzing the trading segment of the Bitcoin supply, Chainalysis finds that although retail traders are responsible for 96% of transactions, professionals move the bulk of the volume:
“Retail traders, whom we categorize as those who deposit less than $10,000 USD worth of Bitcoin on exchanges at a time, appear to be the large majority, accounting for 96% of all transfers sent to exchanges on an average weekly basis. Professional traders, however, control the liquidity of the market, accounting for 85% of all the USD value of Bitcoin value sent to exchanges.”
60% Held With Licensed Custodians
Approximately 60% of the entire Bitcoin supply is held by licensed custodians or Virtual Asset Service Providers, or VASPs. This statistic includes many exchanges. Coinbase alone, holds close to 1 million Bitcoin.
The company assumes 3.7 million BTC are lost, including the approximately 1.1 million coins that were likely mined by Satoshi Nakamoto.
The role of custodians has increased over time, which may pour fuel on the fire for those who believe there is too much centralization within the crypto space.
Updated: 10-19-2020
Number Of Bitcoin Wallets Holding Over 100 BTC Tests 6-Month High
Wallets once again appear to be accumulating cryptocurrency at an increasing rate.
More than 16,159 Bitcoin wallets now hold 100+ BTC according to analytics data provider, Glassnode. An October 19 report from the company stated that this figure tests the previous 6-month high of 16,158, last seen on June 8.
Glassnode additionally posted that the number of non-zero Bitcoin addresses reached an all-time high of 31,913,3555 on October 19; approximately 5,000 of these were recorded within the past 24 hours.
On October 5, Cointelegraph reported that analyst and market cyclist Cole Garner had highlighted a two-year record increase in new BTC addresses within the first week of October.
Using data from Glassnode, Garner determined that around 22,000 new Bitcoin “entities” had appeared in a single day — a significant jump above the normal figure of 5-10K per day.
In May, Bitcoin wallets holding a non-zero number of coins crossed the 30 million mark for the first time. More than 99% of these wallets contain less than the once-modest sum of 10 BTC.
‘Old Hands Selling Out’ Metric Shows Bitcoin Price At Risk Of HODLers Dumping
On-chain data shows dormant addresses are selling BTC, leading some analysts to make bearish calls on Bitcoin price.
Old hands are selling their Bitcoin (BTC) holdings, according to glassnode’s Coin Dormancy metric. As shown below, dormant addresses selling BTC marked previous tops in BTC.
On-chain analyst Willy Woo said old hands reliably sold the top until the most recent price cycle. He wrote:
“Dormancy is a measure of ‘old hands selling out.’ It’s interesting to see old hands reliably sold tops until this present cycle. They sold the #bitcoin bottom at $3-$4k, they are selling right now.”
There are several reasons long-time holders are selling BTC at the current price. BTC has increased by three-fold since March, and it is a decent take-profit area for sellers. The $12,000 area has also served as a strong resistance level throughout the past two months.
Will The Dormant Bitcoin HODLers Be Proven Right This Time?
Atop the various technical reasons, there are cyclical reasons that could encourage dormant Bitcoin holders to sell.
In the last two fourth quarters, Bitcoin recorded negative returns. The tendency of BTC to underperform during the last quarter, alongside the $12,000 resistance, could compel holders to take profit.
However, some technical analysts believe Bitcoin is at the cusp of starting a new cycle. In the upcoming months, BTC could continue to grind upwards to higher resistance levels and not see a major pullback.
Filbfilb, a popular cryptocurrency analyst, pinpointed the post-halving cycle seen in 2017. He said that BTC reached an all-time high after it broke out in the same week four years ago. He wrote:
“Bitcoin’s cyclical behaviour is difficult to escape from. Same week 4 years ago, Bitcoin was trying to finally break the 50% bear market fib retracement. It never looked back after that & tested ATH by January. This time it’s different?”
The trader also noted that institutions are seemingly longing Bitcoin at record levels. Following the high profile investments in Bitcoin from MicroStrategy and Square, the institutional demand for BTC has increased noticeably.
The volume of institution-tailored platforms, including Bakkt and LMAX Digital, has increased substantially in recent weeks. Filb Filb added:
“Although they dont make up much of the OI – Institutional sized traders were only holding long positions last week.”
BTC’s Technical Setup Is Short-Term Bearish But Fundamentals Are Strong
Most of the short-term bearish signals for Bitcoin are technical rather than fundamental. Various fundamental metrics signify strengthening momentum, including the Bitcoin hashrate.
On Oct. 19, the Bitcoin hashrate hit a new all-time high once again, which is a highly optimistic trend especially after the May 11 halving. John Todaro, a cryptocurrency venture capitalist, said:
“Bitcoin hash rate hit new all-time highs (again). The recent price rally has increased mining revenues, pushing more miners to allocate greater resources to the network, thereby increasing hash rate. Whatever happened to that mining death spiral thesis after the halving?”
Updated: 1-8-2021
Finally, A Good Reason To Sell Bitcoin: Hodler Liquidates To Pay Off Parents’ Mortgage
Bitcoin HODLers are divided on whether now was the best time to sell. But mom and dad…
Reddit’s r/Bitcoin community continues to pull on our heartstrings. On Thursday, a user by the name of “u/Bigtony96” claimed to have sold their entire Bitcoin (BTC) stash to pay off their parents’ mortgage.
The Redditor supposedly unloaded a total of 6 BTC accumulated over the past three years to close out the remaining balance on their parents’ home. They said there was enough money left over to cover taxes and, possibly, buy a new car.
“Today is the day I’ve dreamt of for the past several years, and it feels so surreal,” the user said.
In the post, u/Bigtony96 explained their motivation for wanting to help their parents, whose restaurant business was ravaged by government lockdown orders:
“My parents are everything to me. […] They’re in the restaurant business and the pandemic forced them to burn through a large chunk of their savings, and they stress out over finances every single day. My dad always told me one day he’ll retire once the house is paid off, and that day is finally here.”
While u/Bigtony96 didn’t specify exactly when the BTC was sold, the sale likely occurred on Thursday, as evidenced by the title of the post: “Just sold to pay off my parents’ mortgage.”
Bitcoin’s price surged above $40,000 on Thursday in a remarkable show of force. As Cointelegraph reported, it took BTC less than three weeks to double in price from $20,000.
This isn’t the first time Cointelegraph has picked up on intriguing stories from Reddit’s Bitcoin and crypto communities. Earlier this week, Cointelegraph reported that a user sold their free Reddit Moon tokens to make rent after burning through all their savings. Another managed to covert their Moon tokens, which are earned through community engagement, into Bitcoin for huge profits.
Updated: 2-3-2021
Small And Medium Hodlers Control 40% Of The Bitcoin Supply — Data
Distribution “keeps getting better,” says Willy Woo amid continued claims that Bitcoin as a network is too centralized.
Bitcoin (BTC) ownership is becoming more decentralized every day, data shows, allaying fears that the supply is being controlled by an elite.
Data from Glassnode reproduced by statistician Willy Woo on Feb. 3 shows that the number of smaller Bitcoin holders and those holding coins on behalf of clients keeps growing.
Bitcoin In The Hands Of The Little Guy
Despite BTC/USD rising to record highs in recent weeks, more, not fewer, small investors are coming in board. At the same time, longtime BTC hodlers, known as “humpbacks” in reference to their status as the largest and oldest whale investors in the space, are not cashing out.
“Distribution keeps getting better,” Woo summarized in a series of tweets on the data.
The numbers serve to alleviate fears of centralization fanned by recent articles in the mainstream press on the back of Bitcoin price rises and associated publicity.
In a piece on Jan. 31, Bloomberg used a report from research entity Token Analyst to claim that “Bitcoin’s infrastructure is more centralized than ever before,” and that this was “raising alarms about the security and viability of what is championed as a decentralized network.”
In late December, Forbes targeted mining as an alleged victim of “Chinese centralization.”
Proponents meanwhile continue to highlight Bitcoin as the antidote to the centralization which has undermined fiat currencies around the world.
“How did we get to this point? Centralization, complacency, and a detachment from monetary reality,” commentator Marty Bent wrote in his latest blog post on Feb. 1.
Trader: Big Buyers Will Sell Eventually
A minor preoccupation nonetheless remains the impact of major selling on distribution should new institutional buyers choose to take profit.
For popular trader Scott Melker, such a scenario is a matter of “if,” not “when,” and the idea that institutions will hodl ad infinitum is a myth.
Both MicroStrategy and Grayscale added to their positions this week, the former purchasing 295 BTC on Tuesday while the latter’s Bitcoin assets under management now total $22.5 billion.
“Regardless of all of the reports surfacing about hedge funds exploring Bitcoin, it is our belief most are going to lock in profit at some point, whether they own GBTC or custody their own coins. So, our answer is yes, institutions will sell their bitcoin,” he wrote this week.
“But it is reasonable to believe many companies and funds will add Bitcoin to their balance sheet in some denomination as an inflation hedge rather than a short-term profit opportunity, leaving some Bitcoin off the market for good.”
Updated: 2-25-2021
People Who Bought Bitcoin In 2017 Becoming The Strongest HODLers, New Data Shows
Investors who began their Bitcoin journey three to five years ago have stronger hands than you might think.
Bitcoin (BTC) may be worth almost three times more than at the height of its 2017 bull run, but a lot of hodlers from that time refuse to sell.
The latest data from Bitcoin financial services firm Unchained Capital shows that 2017 buyers control an increasingly large amount of the BTC supply.
2017 Hodlers Are Not “Weak Hands”
According to Unchained’s HODL Waves chart, which ranks the supply according to when coins last moved, those who bought three to five years ago are sitting on their investment.
Since the cross-asset crash of March 2020, when BTC/USD fell to lows of $3,600, the percentage of the BTC supply that last moved between February 2016 and February 2018 increased from 5.57% to 13.38%.
In other words, the uptrend in price during 2019, much of 2020 and all of 2021 has not made 2017 bull run investors sell after surviving the multiyear bear market.
By contrast, the five-year to seven-year and seven-year to 10-year hodl crowd has been reducing its presence over the past year.
“At the beginning of January, 59% of all bitcoin in the network were sitting for longer than 1 year without moving, and by the end of the month, that number dipped to 57%, a decrease of 2% or around roughly 372,320 bitcoin,” Unchained wrote in an update earlier this month.
“It appears that most of the bitcoin transacted during January was bitcoin sitting for less than 3 years, as the bitcoin resting for 3-5 years actually increased by .8%, totally unperturbed by the price volatility. These are the folks that have been holding ever since the last price spike of $15,500 in January 2018, or from $431 in January of 2016.”
10-Year Veterans Hold Tight
The data counteracts an informal narrative still found online that claims that Bitcoin breaching $20,000 for the first time since 2017 last year triggered a mass sell-off from investors desperate to exit at parity or with a modest profit.
As Cointelegraph reported, subsequent gains produced limited selling beyond the whale investor crowd, with any price drips aggressively bought up.
HODL Waves likewise confirms that appetite for Bitcoin has not been dented by price rises beyond $30,000, $40,000 and even $50,000.
A separate cohort, those who bought before 2011, is meanwhile similarly responsible for a larger amount of the supply. Since March 15, 2020, their share has increased from 6.85% to 10.24%.
A stash of 100 BTC, untouched since 2010, made its first reappearance on the network this week.
— Willy Woo (@woonomic) February 25, 2021Unlike 2016 to 2018, however, the situation is complicated by the advent of large-scale corporate buyers, notably MicroStrategy, which this week announced its latest buy-in, taking its total Bitcoin holdings to over 90,000 BTC.
Nervous Newbies Are Taking Profits While Long-Term BTC Investors Hodl Strong
Despite short-term Bitcoin trading spiking in January, wallets that have been inactive for at least three years are the largest segment of the BTC holders.
Long-term Bitcoin hodlers appear not to be selling despite 2021’s all-time highs, while nervous newbies have been taking profits along the way.
According to Unchained Capital’s “Hodlwaves” chart — which visually illustrates the time since BTC wallets were last active on-chain, 2021 has seen an increase in both long and short-term activity.
The chart shows the number of coins that have moved in the past 30 to 90 days is at its highest level since 2018. These addresses represent more than 15% and are currently the largest segment of BTC wallets.
Bitcoin wallets that have remained inactive for between three and five years are currently the second-largest segment, representing 13.5% of all addresses. These wallets have also steadily expanded in number during 2021, with onlookers speculating the data may reflect a large number of BTC bag-holders who bought during the 2017 season and held throughout the entire bear trend.
While the share of wallets that have not been active in between five and 10 years appears to have been shrinking over the past year, the number of addresses that have been inactive for at least a decade has increased from roughly 1.7% two years ago to 10.7% today.
On March 11, CTO and co-founder of on-chain crypto analytics firm Glassnode, Rafael Schultze-Kraft shared data revealing the number of wallets that have not been active in the last three or more years has steadily increased since late December.
1+ year hodlers: selling 2+ year hodlers: selling 3+ year hodlers aka “been in a bull market before and know how this works”: stacking sats#Bitcoin
However, the data shows that the share of Bitcoin wallets that have been inactive for at least 12 months has dropped from record highs of nearly 65% in January to 55% today, with nearly half of Bitcoin wallets active in the past year.
Updated: 3-22-2021
Long-Term Investors Continue To Hodl Despite $1T Bitcoin Market Cap
Only 36% of Bitcoin’s supply has moved in the last 6 months, down from 50% during last bull season.
Bitcoin’s liquid supply continues to shrink, with only 36% of circulating BTC being moved on-chain in the past six months.
According to data shared by on-chain crypto data aggregator Glassnode on March 21, the peak of the 2017 bull market saw 50% of Bitcoin’s supply circulating within the preceeding six months.
In bull markets old coins tend to move more. This increases the relative supply of younger coins in the network.
At previous $BTC tops, around 50% of the #Bitcoin supply was younger than 6 months.
The data shows that few long-term investors are tempted to sell their Bitcoin at current price levels, suggesting Bitcoin’s whales are hodling for higher prices and the current bull-trend could have much further to go.
Comparing the age of BTC moved on-chain may offer some insight into market sentiment. When prices hit new peaks it is natural that older coins will be sold for profit, but that trend appears to be decreasing — suggesting that investors would rather hold on to their assets.
The current supply of BTC is 18.66 million or 88.85% of the 21 million limit. It has also been reported that around a fifth of all BTC has been lost or stolen, suggesting the actual circulating supply of Bitcoin could be considerably lower, bolstering the scarcity of the asset.
Glassnode data shared by popular crypto analyst Willy Woo on the same day also noted significant on-chain activity while Bitcoin’s market cap has been above $1 trillion, with 7.3% of BTC’s supply changing hands while the asset has boasted a 13-figure capitalization.
“This is pretty solid price validation; $1T is already strongly supported by investors. I’d say there’s a fair chance we’ll never see Bitcoin below $1T again.”
“URPD is a lens into price discovery by showing the price when coins last moved assuming they were bought by investors,” he added.
However, Woo noted that on-chain coin movements do not always indicate active trading, with exchanges regularly shifting their digital assets internally.
Updated: 3-28-2021
Bitcoin HODLers Are Not Selling: Inactive BTC Supply Hits 3-Month Low
Bitcoin supply that has not moved for over two years has hit a 3-month low, indicating conviction from long-time HODLers.
Long-time Bitcoin (BTC) HODLers are refraining from selling their holdings, on-chain data from Glassnode shows.
According to Glassnode’s “BTC Percent Supply Last Active 2+ Years” indicator, Bitcoin that was last moved well over two years ago reached a three-month low to 45.364%.
This trend indicates that Bitcoin HODLers who bought around the top of the last bull cycle in 2018 and before are showing deeper conviction as BTC consolidates above $55,000.
Interestingly, the spike during December 2020 suggests that many may have sold at a breakeven of around $20,000, or the previous all-time high in late 2017.
Why Is Bitcoin Consolidating With Low Volatility Bullish?
Bitcoin typically tops or sees a severe correction when long-time holders begin to sell rapidly.
In previous bull cycles, the sell-off from HODLers taking profit on their positions led to swift 50% drops, leading the entire cryptocurrency market to pullback intensely within short periods.
This trend coincides with the fact that HODLers are not selling a significant amount of BTC, indicating that the top could still be faraway from being reached.
Bitcoin stabilizing at around $55,000 is highly optimistic because of two main reasons. First, BTC has maintained a strong market structure despite some headwinds. Second, BTC consolidating closely under an all-time high is technically a positive sign.
In the past two weeks, Bitcoin faced major threats that could have catalyzed a serious short-term downturn.
Namely, the U.S. Treasury yields surged. This often causes tech stocks to drop-off, which negatively affects all risk-on markets.
Atop this, as CryptoQuant CEO Ki Young Ju explained, miners are holding a lot of Bitcoin that they have not sold in recent months. In fact, the amount of BTC moved by miners was significantly less compared to previous pullbacks this year. This may suggest that miners are likely expecting higher prices down the road.
On March 17, Ki also noted three other factors based on on-chain trends that could contribute to a stagnating uptrend for Bitcoin. He wrote at the time:
“I think $BTC would take some time to get another leg up in terms of demand/supply. 1/ Too many $BTC holdings in USD compare to stablecoin holdings on spot exchanges. 2/ BTC market cap is too big to get another leg up by leveraging stablecoin market cap solely. No significant USD spot inflows – Neutral coinbase premium, and negative GBTC, QBTC premium.”
Despite the above-mentioned risks, Bitcoin has performed relatively well, avoiding a drop below $50,000.
Is The BTC bottom In?
Well-known pseudonymous traders, including “Rekt Capital,” have said that in the next couple days, there could be sufficient confirmation that a Bitcoin bottom could form.
It is difficult to predict when the exact bottom would form, but if BTC remains above $55,000 for a few days and prints a “higher low” formation, the trader said a new rally could occur. He wrote:
“You will never truly know when the actual #BTC bottom of the retrace is But you can look for ways for how a potential bottom could be confirmed If $BTC forms a Higher Low in the next couple of days, that should be sufficient confirmation that the bottom is in.”
Therefore, as long as the price of Bitcoin holds above $55,000 in the near term, the higher low formation would be intact as the market enters April, a historically bullish month that hasn’t closed in the red since 2015.
Updated: 3-30-2021
Oops! A 100% Bitcoin Hodl Outperformed CNBC’s 2017 Altcoin Basket By 170%
New numbers conclude that the best returns come from cutting through the noise and simply buying Bitcoin.
Bitcoin (BTC) has produced phenomenal returns most years, but when it comes to maximizing them, it’s best just to buy and hodl.
That was the conclusion from new data circulating on social media this week, which casts serious doubt on the merits of following investment advice from mainstream media.
Don’t Believe The Hype?
Under the microscope was CNBC, which in 2017 offered viewers an investment portfolio made up of 30% Bitcoin and 70% altcoins.
Four years later, those who invested $10,000 at the time now have around $52,300. Had they just bought and hodled Bitcoin, however, they would have over $140,000.
“The 30% #BTC allocation is responsible for 75% of the return,” Twitter account StatsBTC, which uploaded the numbers, noted in comments.
CNBC’s portfolio came courtesy of well-known pundit Brian Kelly, months before it hit then all-time highs of $20,000. Altcoins also saw peaks, months later in early 2018, with most only to crash and never recover.
Subsequently, the network gained an unenviable reputation for acting as a buy signal for investors — ironically by telling them not to invest in Bitcoin. The same fate has since befallen the likes of gold bug Peter Schiff.
As Cointelegraph reported, fellow host Jim Cramer, on the other hand, has embraced Bitcoin thanks to persuasion from Morgan Creek Digital co-founder Anthony Pompliano. His investment, thought to be around $500,000, has made Cramer “a ton of money,” he said earlier this month.
All Hail The King
Meanwhile, even a longer-term HODL strategy will have suffered from exposure to altcoins at the expense of its Bitcoin presence.
According to Bob Simon, owner of the StatsBTC account, $100 divided equally between Bitcoin, Litecoin, XRP, Dogecoin and Peercoin in March 2014 would now be worth $6,000. A Bitcoin-only punt, by contrast, would sell for $12,130.
“An equally weighted basket of the top 5 cryptocurrencies has underperformed Bitcoin by over 50% over the past 7 years,” he summarized.
Analysts still believe that this coming summer will produce huge gains for altcoins, with one arguing that a peak price “Alt Season 2.0” has already begun.
Updated: 4-1-2021
Bitcoin Newbies Are HODLing As Prices Rise, Blockchain Data Suggests
The new generation of HODLers were forged during market rallies over the past year, and show no signs of slowing down.
There’s a new generation of bitcoin HODLers.
New research from Glassnode, an on-chain data platform, shows continued growth in bitcoin (BTC) held between one month and six months, indicating strong conviction behind the recent price rally.
These coins were accumulated throughout the recent bull market, which means new HODLers (meaning, those holding crypto) are sitting on a near 500% increase since October.
* These HODLers were “forged in the dynamic market rallies brought on in 2020 and 2021,” according to Glassnode. “Many are on their way to becoming classified as long-term holder coins.” * BTC purchased between $10,800 and $58,800 now represents 25% of the total supply with no sign of slowing down, based on Glassnode’s data. * This means HODLers have continued to accumulate BTC throughout this bull market. “HODLed coins are beginning to mature, and continued outflows from exchanges demonstrates accumulation is not slowing down,” according to Glassnode.
Also, more BTC investors are moving their holdings into storage, which suggests less interest in short-term trading. Over the past 12 months, over 3% of the circulating BTC supply has migrated out of exchanges and into third-party wallets, according to Glassnode.
“Only two major exchanges have seen aggregate positive inflows (increased balances), Binance and Gemini. Gemini inflows will also correlate with Gemini’s institutional custody solutions, which further adds to the supply held in long-term storage.”
“Strong signals of accumulation show a supply vs. demand balance that is unlike any bull cycle we have seen before,” wrote Glassnode.
Updated: 5-18-2021
1.1M Noobs Panic Sell, But Bitcoin Hodlers DGAF
Weak hands are panic selling, but long-term BTC holders have seen it all before.
While new entrants to Bitcoin (BTC) markets have been panic selling at a loss, the recent market slide has not vexed the old hands.
Heavy selling in response to hints from Elon Musk that Tesla may soon sell its BTC stash saw Bitcoin prices tumble to their lowest levels in 20 weeks as the markets found support near $42,000 on Monday.
According to on-chain analytics provider Glassnode, the crash predominantly saw newer traders exiting from their positions at a loss, while long-term hodlers stood their ground.
Glassnoded noted Bitcoin’s adjusted Spent Output Profit Ratio (aSOPR), a metric that shows whether BTC was in profit or at a loss when it was last transacted on-chain, fell below 1.0 amid the dip. An aSOPR of less than 1.0 indicates aggregate losses have been realized on-chain and are most pronounced in short-term holders (coins younger than 155-days) — traders who purchased during the 2021 bull market.
The total number of addresses holding a non-zero BTC balance has also retreated by 2.8% from its recent all-time high of 38.7 million as more than 1 million traders liquidated their positions. Glassnode stated:
“A total of 1.1M addresses have spent all coins they held during this correction, again providing evidence that panic selling is currently underway.”
Glassnode asserted the volatility in the share of supply represented by short-term holders is indicative of panic selling, noting the similarity between recent patterns in supply distribution and those observed amid the macro peak of the 2017 bull season. Markets usually find a macro peak when new holders hold a relatively large portion of the total supply.
Coins held by short-term holders recently hit a peak of 28% of the circulating supply or around 5.3 million BTC.
Glassnode estimates Bitcoin has shed more than 28% since tagging an all-time high of $63,600 on April 13. The retracement is the deepest correction of the current bull market.
Updated: 5-25-2021
Number of Bitcoin Holders Shoots To Record High, Data Shows
Investors with long-term horizons seem to be accumulating cheaper coins.
The number of bitcoin (BTC, +1.84%) addresses in accumulation has risen to a record high as investors with long-term horizons take advantage of the recent price drop to boost their coin stashes.
* The count of accumulation addresses climbed to a record for the seventh consecutive day on Monday, taking the total to 545,115, according to Glassnode data. * The number has increased by 16,445 since May 8 – a sign of persistent bargain hunting by long-term holders during bitcoin’s slide from $58,000 to $30,000. * The balance held in accumulation addresses has jumped by 30,000 during the same time frame, hitting a two-month high of 2.79 million BTC. * Glassnode defines accumulation addresses as ones that have at least two incoming non-dust (tiny amounts of bitcoin) transfers and have never spent funds. Essentially, these are long-term holder addresses. * Over-the-counter (OTC) desks have also seen substantial outflows over the past two weeks, signifying dip-demand from institutional investors. * On Monday, OTC desks tracked by Glassnode registered an outflow of 11,883, the most since early September. * However, inflows to OTC desks wallet also spiked to a 5.5-month high of 12,392 on Monday. Inflows indicate an intention to sell but do not imply immediate liquidation. * Bitcoin is currently trading near $38,000, representing a 2% drop on the day, according to CoinDesk 20.
Updated: 5-31-2021
Bitcoin Accumulation Uptrend Can Create A 2013-Style BTC Price ‘Double Pump’
Long-term Bitcoin holders remain unfazed by the recent sell-off, but there is still one alarming sign.
A recent run-down in Bitcoin’s (BTC) price from about $65,000 to as low as $30,000 did not force long-term holders into selling, Glassnode data shows.
The on-chain analytics platform revealed a spike in Bitcoin reserves held in wallets with lower unspent output just as BTC/USD’s bids were crashing.
Meanwhile, the data also shows a Bitcoin collecting spree among miners — the entities that produce and supply newly minted cryptocurrencies for retail markets. As a result, the active BTC supply started declining in recent sessions.
Short-term Bitcoin holders — the entities that hold the flagship cryptocurrency for less than a week after accumulating it — were the biggest sellers during the BTC/USD rate decline.
Glassnode data suggested that newer market entrants panic-sold BTC during the May downturn, a month during which BTC lost 38% from its all-time high price.
Bitcoin price volatility, meanwhile, continues to exploit short-term traders with double-digit percentage up/down moves.
The 24-hour Bitcoin Volatility Index on TradingView settled around 19.70 on May 20 after bottoming out at 1.90 on April 2 — that marked a 936% climb during the period, wherein BTC/USD rose to hit an all-time high near $65,000 and corrected lower to reach $30,000.
Elevated price fluctuations served as a signal that investors remained fearful or uncertain about Bitcoin’s next market bias.
The intraday candles in the chart above showed persistent higher volatility — the one on Sunday closed 34% lower than the previous session. But overall, the trend appeared on its way to the downside.
Except, There Is One Catch
Glassnode anticipated that long-term holders realize their profits or losses at some point in time (PnL). The analytics portal cited a proprietary metric that checks on long-term holders’ exhausting levels — the point at which their ability to hold BTC breaks, and which prompts them to realize their profits or losses in the market.
“The current degree of net unrealized PnL held by LTHs tests the 0.75 level, which has been the make or break level between past bull and bear cycles,” wrote Glassnode analysts.
“Only in the 2013 ‘double pump’ scenario did this metric see a recovery.
Should LTHs continue to see their paper gains fall, this too may create a new source of overhead supply. On the other hand, higher prices and a supply squeeze from buying the dip would begin to resemble the ‘double pump’ scenario from 2013.”
Bitcoin Macroeconomically Bullish
The only factor that separates the current Bitcoin holding scenario from the previous ones is the United States’ trillion-dollar deficits. The world’s largest economy has returned to its highest debt-to-GDP ratio since World War II. And on Friday, President Joe Biden announced another $6-trillion spending plan for 2022.
In total, the plan would raise government spending to $8.2 trillion per year by 2031. It would mean annual fiscal deficits of over $1.3 trillion and $1.8 trillion in 2022.
One of the biggest fears in the market is that increased government spending would lead to a dramatic rise in inflation.
Demand for Bitcoin has surged among institutional investors for its anti-inflation narrative. Supporters note that there can only be 21 million BTC tokens in supply, making it an ideal store of value against an infinitely printable U.S. dollar.
Corporates including Tesla, Square, MicroStrategy and Ruffer Investments have added Bitcoin to their balance sheets as an alternative to cash. Billionaire investors, including Stan Druckenmiller, Paul Tudor Jones and Mike Novogratz have also allocated a considerable portion of their investment portfolio to Bitcoin.
Fundamentals continue to provide Bitcoin a bullish backstop.
“Bitcoin was made for this moment,” noted Dan Held, director of growth marketing at Kraken. “We’re in the biggest money printing operation ever in human history, and Bitcoin is the only way out.”
Updated: 6-3-2021
Pre-2019 Bitcoins Now Make Up Just 44% Of The BTC Active Supply
Despite the May sell-off, strong hands are mostly holding firm at prices that seemed impossible two years ago.
Bitcoin (BTC) is less active than at any time this year, new data shows, as traders stubbornly refuse to sell.
One metric from on-chain monitoring resource Glassnode reveals that the Bitcoin supply is becoming less and less available despite lower prices.
“Spooked” Hodlers Cling To BTC
On Wednesday, Bitcoin’s active supply hit a five-month low of 44.5%.
The number measures coins that have moved in the past two years or earlier — and the last time it measured that low, BTC/USD traded at around $22,000.
The figure shows just how unattractive the idea of selling Bitcoin at current prices is to investors who purchased up until the 2019 bull run. As Cointelegraph reported, 2017 buyers already represent a strong cohort of “hodlers of last resort.”
This goes some way to shoring up morale over future price action as various indicators including sentiment measure the Crypto Fear & Greed Index show a $36,000 Bitcoin appears undervalued.
Nonetheless, the May sell-off ushered in a surge of newly liquid coins, something that managed to buck a two-year accumulation trend.
“The magnitude of accumulation over the past two years is remarkable, however, the scale of the sell-pressure in May is also notable,” Glassnode wrote in a digest last week.
“Investors were clearly spooked during this recent sell-off.”
Exchange Balances Creep Higher
Just as reluctant to sell, meanwhile, are miners. Relative to historical average, the outflows from miner addresses is now at a seven-month low.
May’s action likewise triggered an uptick in sales, but this has since reversed — and is now at its lowest since November 2020, when Bitcoin traded around its all-time highs from 2017.
Only retail traders are waiting in the wings for a potential switch-up as the balance of BTC on exchanges continues to climb after its mid-April bottom. This also coincides with the comedown from current all-time highs of nearly $65,000.
Updated: 6-16-2021
New Bitcoin Bull Market Hodlers Are Refusing To Sell At $40K, Data Suggests
Those who bought Bitcoin this bull market are in no hurry to sell, says Glassnode, as small-time investor numbers also grow.
Bitcoin (BTC) investors continue to hodl BTC at $40,000, even if they bought it at lower levels earlier in 2021.
In the latest edition of its newsletter, “The Week On-Chain,” on Monday, on-chain monitoring resource Glassnode revealed that buyers from the first months of this year’s bull market are refusing to cash out.
“Very Young” Supply In Decline
Bitcoin has been marked by low volume in recent weeks as price action remained rangebound between $30,000 and $41,000.
The past few days has seen modest volatility return, but for most hodlers, there are few opportunities for profiteering under current circumstances.
Glassnode suggests that this is clear by looking at so-called Hodl Waves, an indicator that shows what proportion of the Bitcoin supply last moved. These are based on Bitcoin’s realized cap, a measure of the market capitalization that takes into account the price at which each coin last traded.
Hodl Waves confirm that, in part thanks to low volatility, the Bitcoin supply is ageing, and few investors are selling.
“Not Only Are We Seeing A Decline In Very Young Coins
“These are those same HODLed coins that were accumulated throughout the 2020 to Jan 2021 bull market.”
As such, even coins now in profit by a significant percentage, if not double their buy-in price, remain dormant.
“Some LTHs (long-term holders) have and will take profits on their coins,” Glassnode acknowledged.
“What is common in all Bitcoin cycles is that LTHs spend a larger majority of their coins into the strength of bull rallies, and slow their spending on pull-backs as conviction returns.”
The “Little Guy” Makes A Comeback
Long or short term, investors with smaller overall holdings are growing.
As Glassnode subsequently noted this week, wallets with less than 1 BTC continue to make up more and more of the overall Bitcoin supply.
“The response of ‘the little guy’ to the evolution of Bitcoin as an asset can be seen in the supply distribution,” the company posted on Twitter Wednesday.
While institutional and now even state adoption of Bitcoin compose most of the headlines when it comes to expanding influence, it is individual small-scale investors who are making noticeable inroads into the market this year.
Updated: 7-5-2021
Bitcoin Exchange Supply Hits A 6-Month Low As Accumulation Continues
The likelihood of another steep selloff for BTC is diminishing as more holders are accumulating, according to data from Santiment.
The amount of Bitcoin (BTC) held on exchanges has been declining steadily since mid-May, offering reassurance that the worst of the market selloff has passed.
At current levels, Bitcoin’s exchange supply is at its lowest level since early January, according to crypto analytics firm Santiment. “The 6-month low is a promising sign, as it generally will indicate that there is a decreased risk of more major $BTC selloffs,” the analytics firm tweeted Monday morning.
The ratio of #Bitcoin‘s supply on exchanges has encouragingly slid down to its lowest since early January. The 6-month low is a promising sign, as it generally will indicate that there is a decreased risk of more major $BTC selloffs. https://t.co/vFh7pcjUmXpic.twitter.com/t3duiStvg6
Exchange inflows began to spike in early May, which likely served as a precursor to Bitcoin’s steep selloff through the middle of the month. The Bitcoin selloff intensified on May 19, culminating in a $1.2 trillion decline for the entire cryptocurrency market.
Exchange-flow data is an important metric for monitoring Bitcoin’s price trajectory in the short to medium terms. Net inflows often foretell a steep selloff as more investors transfer their holdings from cold wallets, possibly for the purpose of selling. Case in point: In May, Bitcoin experienced the biggest exchange inflows since the March 2020 COVID-19-related crash.
While Bitcoin remains in a firm intermediate downtrend, investors are finding more reasons to be bullish. The speed of adoption in places like Latin America, an anticipated shift in mining from China to other regions and growing indications that the market has bottomed are all causes for optimism.
On the flip side, analysts continue to warn of an uncertain outlook in the short term, with several prominent industry voices calling for a steeper correction this year.
Updated: 7-7-2021
Bitcoin Analyst Says ‘Supply Shock’ Underway As BTC Withdrawal Rate Spikes To One-Year High
The supply shock is being unnoticed, similar to Q4 2020 before the price of Bitcoin skyrocketed, says Willy Woo.
As Bitcoin (BTC) continues trading sideways inside the $30,000–$40,000 range, new data is emerging about the potential for a bullish breakout.
Is Bitcoin Silently Readying For A Breakout Like In Q4 2020?
Willy Woo, an on-chain analyst, anticipates a potential supply shock in the Bitcoin market, as long-term holders continued raking BTC supply from short-term ones. Woo stated in his Friday newsletter that the process might push more Bitcoin out of circulation.
The analyst referred to the ratio of Bitcoin held by strong hands versus weak hands — also known as Bitcoin Supply Ratio — noting that the former is actively absorbing selling pressure from whales who have been dumping their crypto holdings since February.
“It reminds me of the supply shock that went by unnoticed by the market in Q4 2020,” wrote Woo. “Pundits were debating whether BTC was an inflation hedge in a post-COVID world when the data was pointing to long term investors stacking BTC at a fast pace.”
“The price subsequently went on a tear, very quickly de-coupling from its tight correlation with stocks.”
New Active Users Rising
Glassnode, another on-chain data analytics service, also boosted Bitcoin’s booming adoption prospects. The portal revealed that the Bitcoin network has been onboarding an average of 32,000 new users every day, which is a new high for 2021.
The Bitcoin Network User Growth metric last topped in January 2018, hitting approximately 40,000 before correcting lower alongside the prices. It showed that new users stopped coming to the Bitcoin network as its price crashed from the $20,000 top in January 2018 to as low as $3,200 in December 2020.
“This is not the structure we are experiencing right now,” explained Woo. “New users are taking this opportunity to buy the dip; they’re coming in at the highest rate seen in 2021.”
“Again, another example of on-chain data showing divergence to the price action.”
Bitcoin is currently stuck below $34,000 at publishing time, up 17.52% from its previous bottom level of $28,800 on June 22.
Meanwhile, Petr Kozyakov, co-founder and CEO of crypto-enabled payment network Mercuryo, believes that Ether (ETH) may steal the limelight from Bitcoin in the near term as the London hard fork approaches.
“The proposed launch of the London Hard Fork upgrade and the ultimate migration to Ethereum 2.0 is helping to renew investors’ confidence,” he added. “Once the hype settles, Bitcoin could move up to $50,000 in the short-to-medium term perspective.”
Bitcoin Withdrawal Transactions Hit One-Year High
Data analytics firm CryptoQuant reported earlier Tuesday that Bitcoin’s net outflow transaction count from spot exchanges crossed the 60,000-mark for the first time in a year. Meanwhile, the total number of Bitcoin deposits to spot exchanges’ wallets decreased to below 20,000.
The BTC withdrawal rate jumped in the period that also saw regulators increasing their scrutiny over cryptocurrency trading platforms. For instance, the United Kingdom Financial Conduct Authority (FCA) has banned Binance — the world’s largest cryptocurrency exchange by volume — from operating regulated activity in the country “without the prior written consent.”
On Monday, Barclays notified its clients that they could no longer transfer funds to Binance, citing the FCA’s order. However, the London-based bank said clients could withdraw funds from Binance to their banking accounts.
Earlier on Tuesday, the People’s Bank of China also took action against a local company for allegedly trading cryptocurrencies on the side of their regular business activities. Beijing had effectively prohibited all kinds of cryptocurrency-related activities in May, effectively forcing the world’s largest crypto mining community in its regions to either shut down or move their operations abroad.
Generally, a run-up in Bitcoin withdrawal rates is seen as traders’ intention to hold the cryptocurrency instead of trading it for other assets, including rival cryptocurrencies and fiat money. Therefore, with overall BTC withdrawals hitting a one-year high, expectations remain higher as Bitcoin is preparing for another upside run on the so-called “hodling” sentiment.
But the total Bitcoin reserves held by exchanges have remained relatively stable since May, indicating that the latest spike in withdrawals has had little impact on the overall exchange balance as of Wednesday.
It’s worth noting that exchanges’ BTC balances can differ greatly based on their geographical dominance.
For instance, trading platforms having association with China and Chinese traders reported declines in their Bitcoin balances. They include Binance, whose BTC reserves dropped by 7,214.97 units in the last week, and Huobi, which processed withdrawals of 4,398.63 BTC in the same timeframe. OKEx BTC balances dropped by a mere 1,357.53 BTC.
However, United States-based Kraken added 6,751.98 BTC to its vaults, the highest among the non-Chinese exchanges, in the previous seven days, while Coinbase’s reserves increased by 168.88 BTC.
Updated: 7-22-2021
Number Of Investors Owning Bitcoin Has Tripled Since 2018
Three times more U.S. investors are holding BTC now than in 2018 according to the poll.
A recent survey has revealed Bitcoin has gained traction with younger U.S. investors in terms of awareness, interest, and ownership over the past three years.
The study conducted by global analytics and advice firm Gallup revealed that the number of investors in the U.S. holding BTC has jumped from 2% in 2018, to 6% as of June 2021. The research defines “investors” as adults with $10,000 or more invested in stocks, bonds, or mutual funds.
It also reported that Bitcoin ownership among investors surveyed aged under 50 has more than trebled over the past three years to 13% from 3% in 2018. Unsurprisingly, it revealed ownership was much lower at just 3% for the over 50s group of investors, though this has also increased three-fold from 1% in 2018.
The researchers noted that Bitcoin’s relatively modest ownership can be contrasted with more mainstream investments. The survey revealed that 84% of the investors polled reported having invested in stock index funds or mutual funds, while 67% said they owned individual stocks, and 50% have bonds.
“At 6%, Bitcoin ownership is more akin to gold, which 11% of investors say they own.”
The results of the poll come from the Gallup Investor Optimism Index survey conducted between June 22 and 29, 2021, among 1,037 investors in America aged 18 and older. The sample for the study was weighted to be demographically representative of the U.S. adult population with a maximum margin of sampling error of ±5%.
Other findings reveal that the risk perception associated with Bitcoin has declined over the three-year period. Nearly all investors surveyed perceived BTC to be a risky investment, however, the percentage calling it “very risky” has declined from 75% to 60%. Most of the remaining 35% now consider it to be “somewhat risky,” while just 5% think it carries no risks.
Gallup concluded that large investments in Bitcoin by well-known companies such as Tesla, Square, and Morgan Stanley may be giving it more mainstream credibility.
A similar survey that polled institutional investors in May and June revealed that more than 80% of hedge fund executives and wealth managers surveyed that are already holding crypto assets intend to increase their holdings.
Updated: 7-29-2021
Record 57K BTC Leave Exchanges In One Day, Dropping Bitcoin Reserves To Pre-Crash Levels
57,000 BTC leaves exchanges in a single day as demand returns with Bitcoin at the upper end of its multi-month trading corridor.
Bitcoin (BTC) demanded a $40,000 resistance flip on Thursday as on-chain data revealed large withdrawals from exchanges.
Exchange Balances Shed 57,000 BTC
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD rise to challenge the upper end of its trading range once more on Thursday.
The pair had seen a pullback after initially hitting multi-week highs of $40,600 on Bitstamp earlier in the week.
Bottoming out at $38,800, Bitcoin then returned for its latest trip to the $40,000 mark, with that level still to be flipped to support convincingly at the time of writing.
Amid concerns over the strength of this week’s rally, data on Thursday nonetheless pointed to genuine demand for BTC at higher prices.
Shared by Bybt and CryptoQuant, the data appeared to show the largest one-day outflow in at least a year. A total of 57,000 BTC left exchanges in 24 hours.
With that, exchange balances returned to levels last seen in mid-May, just before a major price correction after Bitcoin began reversing from all-time highs of $64,500.
In Search Of Solid Support
Despite this demand, however, market participants remained convinced of the need for a higher low construction on BTC/USD before any higher levels could fall.
“I think market needs to go down to put in a HL before continuing up,” popular Twitter trader Pentoshi summarized.
“To put it simply. Been bullish from 29.6k into resistance but today to me signals need to go down for higher low.”
Exactly how low that higher low will be could be anywhere between $36,000 and $32,500, Cointelegraph reported.
Order book data from major exchange Binance, meanwhile, confirmed a narrowing range for spot price, with buyers and sellers encroaching on $40,000 from both sides.
Updated: 8-2-2021
Digital Asset Funds Suffered Outflows As Bitcoin Price Recovered
Bitcoin-focused funds had outflows totalling $19.7 million, partly offset by net inflows to funds focused on other categories, including multi-asset funds.
Digital-asset investment products had their fourth straight week of net outflows, even as cryptocurrency markets staged their biggest rally since early this year.
Net outflows across all digital-asset funds totaled $19.5 million, according to a report Monday by CoinShares.
Bitcoin-focused funds had outflows totaling $19.7 million, partly offset by net inflows to funds focused on other categories, including multi-asset funds.
The price of bitcoin has been on the rise since its July 20 low around $29,000. At press time, bitcoin was trading at $39,716, down 3% on the day.
The outflows during bitcoin’s recent price recovery suggests “investors were using recent strength in prices to take profits,” according to the CoinShares report.
On a year-to-date basis, cumulative inflows for all digital-asset funds remain high , at $4.1 billion, the firm said.
Funds focused on ether, the native cryptocurrency of the Ethereum blockchain and the second-biggest overall after bitcoin by market cap, had outflows totaling $9.5 million, for the second consecutive week. The report said that although investors have been more forgiving, ether is seeing outflows in “only six of the last 12 weeks, compared to 10 for bitcoin.”
Updated: 8-12-2021
Large Hodlers Accumulate Bitcoin Below $50K As BTC Transactions Over $1M Soar
The dominance of Bitcoin transactions of values above $1 million has doubled year-over-year, hinting at a rising institutional involvement in the cryptocurrency space.
Institutions have not left the Bitcoin (BTC) market even in the face of a 50%-plus bearish correction earlier this year, shows data provided by Glassnode.
The blockchain analytics platform reported on Monday that the dominance of Bitcoin transactions exceeding $1 million has surged twofold since September 2020 — from 30% to 70% of the total value transferred.
Since retail investors do not typically engage in large-volume transactions, Glassnode guesses that the institutional investors might have been behind the spike in the $1 million–$10 million transaction group.
Moreover, the platform noted that the Bitcoin network processed the said bulky transactions as the BTC/USD exchange rate traded lower from $65,000 to below $30,000 in the second quarter of 2021.
“As the market traded down to the lows of $29k in late July, the $1M to $10M transaction group spiked markedly, increasing dominance by 20%,” wrote Glassnode in a report from Monday.
“This suggests that these large-size transactions are more likely to be accumulators than sellers and is again, fairly constructive for price.”
Small Transactions Lose Dominance
Glassnode provided additional volume data that showed a structural decline in small-size transaction dominance.
In detail, transactions of less than $1 million fell by half — from 70% in September 2020 to 30%–40% dominance in March–May 2021. The declines suggest that small investors capitulated their Bitcoin holdings to secure early profits.
During the mid-May crypto market crash, the dominance fell to nearly 20% but recovered back to the 30%–40% range as Bitcoin’s price consolidated above the $30,000 support level. It remained within the said percentage range during the recent run-up to levels above $46,000.
“[The data] clearly demonstrates a new era of institutional and high net worth capital is flowing through the Bitcoin network since 2020,” Glassnode asserted.
Hodl Sentiment Returns
More evidence of Bitcoin accumulation came from Glassnode metrics that tracked the hodling behavior of investors.
The “Long and Short Term Holder Supply Ratios” indicator reported that the Bitcoin supply owned by long-term holders (LTH) reached an all-time high of 82.68%. Meanwhile, the short-term holders (STH) supply continued to decline, hitting 20% and suggesting holding and coin maturation in play.
Glassnode suggested that when the STH supply ratio reaches 20%, it follows with a major supply squeeze — i.e., a supply shortage that typically drives the underlying asset’s prices higher.
But who will accumulate the remaining 5% of the adjusted supply? A Glassnode metric suggests coins aged between one week and three months represent a large portion of the liquid supply.
“We can see that after the uptrend in Q1 (old coin distribution), these age brackets have fallen back to bear market equilibrium level of around 12.5% to 15% of supply,” wrote Glassnode, citing the chart above.
“This downtrend indicates that coin maturation is indeed in play, and that many of the 2021 bull market buyers have stuck around to become strong hand HODLers.”
Bitcoin was trading at $45,930 at the time of writing, down 0.73% from its intraday high.
Updated: 1-13-2022
Bitcoin ‘Hodlers’ Give Battered Bulls A Lifeline To Hold On
* Longer-Term Investors Have Been Building Positions Since July * Blockforce’s Munster Sees “Base Of Holders” Unlikely To Sell
As Bitcoin remains well-off its record highs, advocates are finding glimmers of hope for the world’s largest cryptocurrency by analyzing the makeup of its investors.
Even with the gain so far this week, the token is still down over 30% from its November record near $69,000. But on-chain data suggests that more investors are “hodling,” or holding onto their Bitcoin — and for longer amounts of time than before.
According to Noelle Acheson, head of market insights at Genesis Global Trading, about 75% of Bitcoin currently in circulation is held up in so-called illiquid addresses, meaning digital wallets that spend less than 25% of their incoming coins.
Meanwhile, about 57% of Bitcoin in circulation hasn’t moved from the anonymous addresses in over a year, in a sign of long-term holders.
Hodl has been the mantra of cryptocurrency believers during market routs since the earliest days of the digital-asset world, when “hold” was misspelled by a frenzied Bitcoin trader on an online forum in 2013. Anyone willing to stomach the volatility is thought to be hodling.
To Acheson, the increasing amount of illiquid supply explains why Bitcoin’s daily price movements often mimic those of other risk assets like stocks.
While long-term Bitcoin holders are simply accumulating the token, short-term traders view and trade the coin like a risk asset, and their actions drive the daily price movements that often seem to react to macro-trends like inflation data.
In fact, since July 2021, there has been a steady transfer of coins from short-term holders to long-term ones, a trend that has upped the illiquid supply of Bitcoin, according to Blockforce Capital’s Brett Munster, who analyzed Glassnode data. As prices dropped last month, the transfer from liquid to illiquid wallets accelerated.
“This provides a strong base of holders who are unlikely to sell,” Munster wrote in a note this week. It could even be the case that, due to this base of “staunch Bitcoin believers,” the recent leverage liquidations hadn’t caused a larger drop in prices and have kept Bitcoin’s price relatively range-bounded in the last several weeks, he said.
Meanwhile, a metric referred to as Bitcoin’s “dormancy flow” is flashing a historically bullish signal. The flow measures the number of days since a token was last sold — called Coin Days Destroyed — and puts it in the context of the total market capitalization of the token. The measure has now fallen below a key level that has signaled market bottoms in the past, according to Acheson.
“This seems bullish, but these days crypto prices are driven by different concerns than in March 2020, January 2019, etc., so should not be taken at face value. Still, signals like this are worth keeping an eye on,” she said.
Meanwhile, the coin’s 90-day volatility has been trending lower, Bloomberg data show. To Mike McGlone at Bloomberg Intelligence, that makes sense. “Bitcoin volatility normally increases when prices are probing new highs,” he said. It’s “at about the same price since February, and declining volatility is indicative of a consolidating bull market.”
Bitcoin crossed the $44,000 mark for the first time in over a week on Wednesday. The token was down about 2.5% to $42,600 in noon New York trading on Thursday.
Updated: 2-2-2022
Bitcoin Lovers Like The Winklevoss Twins Urge Patience After Declines
* Market Is In “Wait-And-See Mode,” Genesis’s Acheson Says * Tyler Winklevoss, El Salvador’s Bukele Take To Twitter
Bitcoin failed to hold the two-week high registered Tuesday, while advocates from the Winklevoss brothers to the president of El Salvador urged the faithful to remain strong.
The largest cryptocurrency by market value fell as much as 4.5% to $37,087. It peaked at $39,267 yesterday in New York trading, spurring optimism that it was on a path of recouping the losses that had pushed it down from an all-time high in November. Ether declined as much 5.7% percent.
Bitcoin has struggled to break through $40,000, a price that some technical analysts see as a key level. Bitcoin is down about 40% from its all-time high of almost $69,000 nearly nearly three months ago.
The crypto derivatives market is signaling lingering uncertainty, according to Noelle Acheson, head of markets insights at Genesis Global Trading Inc., who noted that indicators are neutral but trending toward negative.
“The market is very much in wait-and-see mode,” said Acheson. “I am not yet bullish in the short-term. The reason is that the mood can shift very quickly.”
Bitcoin has demonstrated a relatively strong correlation with U.S. stock market indices. However, the two asset classes were moving in opposite directions Wednesday, with the Nasdaq 100 and the S&P 500 higher.
Steve Sosnick, chief strategist at Interactive Brokers LLC, said the correlation between Bitcoin and stock markets doesn’t always hold. He noted that more equities were declining than advancing on Wednesday, although heavy-weight Alphabet Inc. is fresh off of a successful earnings report. Bitcoin is “sort of the more volatile cousin of risk assets right now,” he said.
In the meantime, crypto stalwarts including Tyler Winklevoss, co-founder and chief executive officer of Gemini Trust Co., took to Twitter to assure his 1 million followers.
On Monday, El Salvador’s President Nayib Bukele, who’s push to make Bitcoin legal tender in the Central American nation has made him a crypto celebrity, noted that prices are sure to rise.
There are more than 50 million millionaires in the world.
Imagine when each one of them decides they should own at least ONE #Bitcoin
Bitcoin Inactive Supply Nears Record As Over 60% Of BTC Stays Unspent For At Least 1 Year
Only two times before has the proportion of available supply been so overwhelmingly stationary in its wallet.
Bitcoin (BTC) may be struggling at $40,000 but fresh data is reinforcing the fact that hardly anyone is interested in selling.
Data from on-chain analytics firm Glassnode shows that despite price volatility, over 60% of the BTC supply has not left its wallet in a year or more.
Strong Hands Have Rarely Been Stronger
Stubborn hodling by long-term investors is a characteristic that differentiates the current Bitcoin market climate from most other downtrends.
With spot price action passing 50% losses versus November’s all-time highs last month, expectations were for cold feet to kick in — but among seasoned hodlers, the sell-off never came.
In fact, the opposite has been true for an extended period — long-term investors are adding to their positions or staying put on their BTC exposure.
According to Glassnode’s HODL Waves indicator, as of Feb. 18, 60.61% of the BTC supply has not been used in a transaction for a year or more.
The figure is significant — only twice before in Bitcoin’s history has the one-year-or-more value reached that level.
As noted by entrepreneur and investor Alistair Milne, both occasions followed a downtrend and preceded a major bounceback in Bitcoin price action.
There have only been two occasions where 1yr+ HODL’ing of #Bitcoin has been higher (currently 61%).
Early 2016, price $380-450 range Mid-2020, price ~$9000
Both times were during a prolonged consolidation before a huge bull move
As such, the odds are on for an altogether different trend to form for Bitcoin in the mid-term, this potentially defying the broadly gloomy narrative over flagging macro support, rising interest rates and geopolitical tensions.
“Long term HODL’ers patiently HODL’ing because they know what’s likely coming soon,” Philip Swift, analyst at trading suite Decentrader, added about the data.
Low-Timeframe Moves Spell Pain For Speculators
Short-term trends thus appear of little consequence for the majority of the bitcoins in circulation, these nonetheless causing modest anxiety this week.
Monitoring order book activity on major exchange Binance, for example, analytics resource Material Indicators noted “rugs” of support disappearing above $40,000 immediately before Friday’s dip to two-week lows.
As promised here’s an update on how #BTC liquidity is moving. Not sure if the same entity that rugged $13M is the one that added $15M, but pretty confident the one that added is trying to control the short term PA until they get filled.
As Cointelegraph additionally reported, smaller investors have slowed their accumulation activities over the past week.
Updated: 12-19-2022
Federal Reserve’s ‘Reverse Wealth Initiative’ Fails To Spook Bitcoin Hodlrs
The Federal Reserve is seeking to push investors into reevaluating their portfolios by injecting chaos into markets.
The Federal Reserve’s strategy to hike interest rates may continue, making it difficult for the crypto industry to bounce back.
For crypto assets to become the hedge against inflation, the industry needs to explore ways to decouple crypto from traditional markets. Decentralized finance (DeFi) can perhaps offer a way out by breaking away from legacy financial models.
How Federal Reserve Policies Are Affecting Crypto
In the 1980s, Paul Volcker, the chairman of the Federal Reserve Board, introduced the interest hiking policy to control inflation. Volcker raised interest rates to over 20%, forcing the economy into a recession by reducing people’s purchasing capacity. The strategy worked, and the Consumer Price Index (CPI) went down from 14.85% to 2.5%. Even now, the Federal Reserve continues to use the same methodology to bring down high inflation rates.
In 2022, core U.S. inflation reached a 40-year high, making the Federal Reserve consistently hike interest rates throughout the year. This has negatively hit the crypto market.
Mike McGlone, the Senior Commodity Strategist at Bloomberg Intelligence, explained that the Fed‘s “sledgehammer” has “been pressuring crypto this year.” McGlone believes that the Fed’s policies could lead to a crash that is worse than the 2008 financial crisis.
Market data shows a clear pattern where the Federal Reserve’s interest rate hikes correspond to significant drops in cryptocurrency prices. For example, Bitcoin prices declined on May 6 after the Fed’s meeting on May 3 and 4 to increase interest by 0.5%. Similarly, Bitcoin fell to $17,500 after the Fed meeting on June 14 and 15, where they raised interest rates by 0.75%.
The rate hike in June was a significant factor for cryptocurrencies like BTC and Ether to fall 70% since their all-time highs. As the price charts demonstrate, the Federal Reserve’s policies have a direct correlation with crypto market volatility.
This uncertainty hampers the crypto industry from making a definitive comeback. Since cryptocurrencies are a risky asset class, investors are reducing their exposure to crypto due to rising interest rates and recession fears.
The Federal Reserve implemented another 0.75% hike in interest rates in November. The Fed said it was trying to bring down “inflation at the rate of 2 percent over the long run”. The Fed Committee will continue to hike federal fund rates to 3-4%. It “anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”
The Future Trajectory Of Fed Policies
In all probability, the Federal Reserve will continue with its interest rate hikes in accordance with market data feedback. Bank of America wrote,
“The Fed will stress data dependence […] they will get two more NFP and CPI prints before the [December] meeting; if they stay hot, another 75 bps is in the cards, if not, a deceleration to 50 bps is possible.” The strategists added, “The Fed isn’t done hiking until the data says so.”
Echoing the sentiment, Barclays’s credit research team said, “The Fed needs to see inflation turning … before turning meaningfully dovish.” So, there’s a high chance that even if the Federal Reserve reduces the hike percentage, they’ll keep raising interest rates.
Depending on inflation figures, the Fed might slow down its liquidity tightening measures from December but won’t stop with its inflation mitigation strategies immediately. Thus, investors need to brace for a long period of crypto market volatility.
The Federal Reserve intends to create a reverse wealth effect so that investors reassess their crypto portfolio. They want to create a precarious market situation by slowing down demand but also be careful to avoid any chaos.
Despite the U.S. GDP contracting for two consecutive quarters, the Fed is eager to evaluate and implement painful policies. So, the crypto industry needs to find alternative methods to tackle the Fed challenge.
The current market scenario demonstrates that crypto asset prices are entwined with the equity and stock markets. Investors still consider them to be high-risk assets and get skeptical about investing during high inflation periods.
So, it is imperative for the crypto sector to distance itself from other traditional risky asset classes. Fortunately, a U.S. central bank report suggests that risk perception towards crypto is gradually changing.
According to a Federal Reserve Bank of New York report, cryptocurrencies are no longer in the top 10 most cited as potential risks for the U.S. economy. This reveals an important change in the investor mindset, demonstrating that crypto will eventually become a non-risky asset class.
But, that won’t happen if crypto continues to follow the legacy financial model. To beat inflation and offset Fed policies, the crypto industry must embrace decentralized finance for a robust future economy.
Updated: 5-23-2023
Bitcoin HODLing Has Never Been More Popular
More BTC than ever has been held for at least a year, according to Glassnode, a potentially bullish sign.
Investors are hanging onto their bitcoin (BTC) longer than ever – HODLing in industry parlance – according to data from Glassnode.
The proportion of BTC that’s been held for at least a year has climbed to a record 68%, Glassnode data shows, while 55% of bitcoin has been held for at least two years and 40% for three years.
Many analysts consider it bullish when BTC sits dormant on grounds that investors are choosing to hold on rather than sell.
The prevalence of buy-and-hold in crypto contrasts with the long-term shift in U.S. stocks, a market where investors now hold assets for dramatically less time than they used to.
Sean Farrell, head of digital assets research at FundStrat, said that being a long-term holder has tended to get more popular over time. The exception is when markets get frothy and investors who bought dips sell their older coins to eager buyers.
“The trend is bullish insofar it means that higher prices are ahead in this cycle and any reticence to sell from current HODLers could result in a mini-supply squeeze,” said Farrell.
He added that looking at long-term holder supply metrics is not necessarily useful for short-term price signals.
Long-Term-Holder Supply, which Glassnode deems as coins held for longer than 155 days, has also seen a new all-time high — reaching 14.46 million bitcoin. “This reflects coins acquired immediately after the FTX failure maturing into long term holder status,” said the report.
Glassnode’s Liveliness metric – which compares the relative balance between HODLing and spending behavior – also shows investors are hanging on. It has fallen to the lowest level since December 2020.
TradFi Investors Remain Bullish On Bitcoin’s Long-Term Prospects
Despite the market turmoil of the last six months, investment managers say they largely plan to keep putting capital into digital assets, our survey finds.
At last month’s Consensus 2023, CoinDesk hosted two invitation-only Investor Manager Roundtables, one designed specifically for institutional investors (35 pensions, single family offices, sovereign wealth funds, and endowments and foundations) and the other for asset allocators (50 fund of funds, asset managers, and pension consultants).
With the help of AIMA’s Michelle Noyes (thank you, Michelle), I presented the same 10 survey questions to both groups and recorded their responses in real time to get a sense of how these mostly TradFi investors are thinking about crypto. (About half of the managers were “crypto natives”).
At last month’s Consensus 2023, CoinDesk hosted two invitation-only Investor Manager Roundtables, one designed specifically for institutional investors (35 pensions, single family offices, sovereign wealth funds, and endowments and foundations) and the other for asset allocators (50 fund of funds, asset managers, and pension consultants).
With the help of AIMA’s Michelle Noyes (thank you, Michelle), I presented the same 10 survey questions to both groups and recorded their responses in real time to get a sense of how these mostly TradFi investors are thinking about crypto. (About half of the managers were “crypto natives”).
Angelo Calvello, Ph.D., is co-founder of Rosetta Analytics, an investment manager that uses deep reinforcement learning to build and manage investment strategies for institutional investors.
The Lede: So after the spectacular collapses of FTX and Celsius and the crypto bear market, how are institutions feeling about the future of digital assets?
Astonishingly bullish, with almost 70% of institutional investors view crypto investing favorably, while over 95% of managers do so.
Another indication of the groups’ bullishness is their responses to, “When will we see large-scale institutional investments in crypto?” 32% of institutional investors said it is already here, with 16% saying they expect it in 1-3 years and 36% in 3-5 years.
(Keep in mind this group self-identifies as long-term investors). Only 4% said large-scale institutional investment will never occur.
Managers were less bullish on the short-term prospects, probably because they have seen an immediate decline in AUM, with just 12% agreeing “it’s already here.” However, 46% expected such adoption in 1-3 years and 30% in 3-5 years. Unlike institutional investors, the managers could be talking their own book.
The relative bullishness of both groups’ responses was surprising, given their single greatest concern was U.S. regulatory uncertainty (72% institutional investors and 76% managers).
I would have expected both groups to be decidedly bearish or at best neutral on crypto investing and their outlook for crypto to have diminished, especially because the survey was administered after the Coinbase’s Wells Notice, SEC Chair Gensler’s April 18 testimony before the House Financial Services Committee, and the widely held view that this regulatory uncertainty is likely to continue for a while.
A handful of institutional investors also expressed concern about cyber fraud and market manipulation, while several managers were concerned with subject complexity and volatility.
“Almost 70% of institutional investors view crypto investing favorably, while over 95% of managers do so”
Yet, their responses to “What event is most likely to be the catalyst for investing, or increase your investment, in crypto?” reveal a pent-up demand. Both groups selected “clarify the U.S. regulatory framework” as their number one catalyst (60% of institutional investors and 64% of managers).
And, harkening back to my maiden CoinDesk op-ed in February, their second choice of a catalyst was “solid investment opportunities” (32% of institutional investors and 27% of managers). So, crypto still needs to put on big boy pants if it is to attract serious TradFi investments.
The events of 2022, including the FTX scandal, did little to change their sentiment toward crypto investing, but these events are causing many institutional investors to upgrade their due diligence processes.
85% of institutional investors admitted they would improve their due diligence by spending more time vetting deals (52%), demanding more transparency on deals (52%), and digging deeper into operational risks (48%). (This survey question allowed respondents to make multiple choices.)
Their enhancements reveal that they have learned from both Perhaps Ontario Teachers Pension Plan’s and CDPQ’s write-downs of their investments in FTX and Celsius that as fiduciaries their due diligence of crypto investments must be at least as rigorous as that used for TradFi investments.
Managers also plan to change their diligence processes, spending more time vetting deals (36%), demanding more transparency (42%), and digging deeper into operational risks (36%).
Yet, investors beware: 27% said they would make no changes, leading me to wonder how a manager could have such hubris given their target market’s responses and Sequoia’s (and other managers’) FTX experience.
Because much has been written in the past twelve months about BTC’s inherent investment benefits, we asked the groups the following (the groups’ percentage responses are in brackets): Do you believe BTC is….
A Store Of Value (20% For Institutional Investors/43% For The Other Allocators)
A Portfolio Diversifier (28%/30%)
An Inflation Hedge (4/0)
A Hedge Against Banking Infrastructure (12%/15%)
A Reserve Currency (12%/6%)
A Medium Of Exchange (16%/3%)
A Venereal Disease (A La Charlie Munger) (8%/3%)
Institutional investors cast votes for the predictable favorites, with most considering bitcoin a store of value and a portfolio diversifier and a handful viewing BTC as a hedge against banking infrastructure, a reserve currency, and a medium of exchange.
However, only 4% of the institutional investors and none of the managers considered BTC as an inflation hedge, rejecting the trope advanced by TradFi analysts, crypto insiders, and the media in 2021 and 2022.
Who would have thought BTC as an inflation hedge would garner fewer votes than Charlie Munger’s metonymy?
For our final question, I asked, “What investment theme are you most excited about over the next 12 months?” And both groups’ responses were again bullish: institutional investors and managers selected the tokenization of funds and/or real assets as their top choice (52% and 52%).
Surprisingly, at least to me, 20% of institutional investors and 24% of managers chose “long BTC/ETH,” while 16% of institutional investors selected “gaming.”
I’ll admit that this survey was less than scientific and skewed: the participants chose to attend Consensus and accepted invitations to these private sessions, so this is a self-selecting group
Yet its overall bullishness bodes well for the crypto industry and crypto investing but with the proviso that the U.S. state and federal regulators reach a consensus that, borrowing a term from environmental policy wonks, is loud, long, and legal.
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