- Long-term holders are accumulating Bitcoin, with two-thirds of the supply stagnant for over a year
- Our Head of Research, Dan Ashmore, writes that liquidity on the demand side is also drying up, with order books thin and stablecoins fleeing exchanges
- This will kick up volatility in the short-term, leaving Bitcoin open to aggressive moves to both the upside and downside
- Long-term the impact of a dwindling supply is a different discussion, but for now, risk is elevated in the already-risky crypto markets
A lot is made of the demand for Bitcoin. Are institutions giving up on it following a disastrous 2022 that saw the entire crypto sector go up in flames? Is the market moving back in now that interest rate forecasts have softened following the relentless rate hikes over the past year?
But rather than the demand, it is the supply of Bitcoin that is often the more intriguing to look at. Famously sporting a fixed cap of 21 million coins, Bitcoin’s supply schedule is coded into the underlying blockchain. This quality has given rise to a million different theories around the future place – and price – of Bitcoin in the world.
But there is another interesting analytical angle to Bitcoin: before the anonymous Satoshi Nakamoto launched Bitcoin in 2009, the world never had an asset that provided so much visibility over the supply distribution. The nature of the blockchain is that, while the individual holders are anonymous, the distribution of all coins is available for the world to see at all times. So, let’s have a look.
Long-term holders are accumulating Bitcoin
Central to many Bitcoin bulls’ long-term thesis is the idea that long-term holders will suck up supply, leading to an inexorable price rise.
Looking at current holdings, two-thirds of the supply has not moved in a year. That is certainly a large number, and we will get into what that means in the next paragraph. Pushing the timeline further out, over half the supply (53.6%) has been stagnant for over two years, 39.7% has not moved in 3+ years, and 28.6% has been idle for 5 years or longer.
What does this mean for price?
These are large numbers by any stretch. It is impossible to compare them to other asset classes, given that none are trackable on a ledger like the blockchain. Perhaps only commodities such as precious metals can compete with the…
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