Bitcoin’s Liquid Supply Plummets to Record Low as HODLers Stockpile for the Future

"Bitcoin's Surge Above $30,000 Sparks Profitability for Short-Term Holders, Fueling Market Dynamics and Potential Shift in Investor Sentiment"

Bitcoin Price Surge Sparks Optimism Among Investors

In a recent development, the price of Bitcoin has breached the $30,000 threshold, leading to a surge in profitability for short-term holders. This significant milestone has had a profound impact on the spending behavior of these holders and could potentially trigger a transfer of coins to new investors. However, if the price were to descend from its current level of $35,272, it may reverse this trend.

The market dynamics are also evident in the growing disparity between long-term holders (LTH) and short-term holders (STH). Approximately 68% of Bitcoin has remained dormant for over a year, with nearly 30% remaining untouched for more than five years. This stark contrast between the supplies of LTH and STH has resulted in a record low for the latter. Typically, LTHs tend to distribute their holdings when the market reaches new highs. Interestingly, the recent bull run in 2021 has led to a significant decrease in LTH supply, while STH supply and exchange inflow volumes have seen an uptick.

Investor optimism is being fueled by the expectation that Bitcoin will surpass its previous price records. This sentiment is further supported by the potential approval of a spot Bitcoin ETF and the upcoming halving event in April 2024. The market is being driven by this selling resistance, with Bernstein’s bullish forecast of Bitcoin reaching $150,000 by mid-2025 adding to the positive sentiment.

According to a report by Glassnode, as the April 2024 halving event approaches and the likelihood of spot Bitcoin ETF approvals increases, there has been an increase in the supply of self-custodial wallets. Since May 2021, investors have moved over 1.7 million bitcoins from exchanges into custody. The age bands of Bitcoin held for over a year have also reached record highs. This trend has been fueled by the FTX collapse last year and subsequent lows in the 2021 bull market, resulting in a steady growth of illiquid supply as coins are moved into illiquid wallets.

The Hodler Net Position Change indicator has confirmed the accumulation trend among LTHs, with smaller cohorts also aggressively accumulating since late October. This has led to a divergence between the supplies of LTHs and STHs. Additionally, the recent price rally has prompted significant profit-taking by short-term holders, as indicated by the Sell-Side Risk Ratio indicator.

Bitcoin’s price has once again surpassed $35,000, signaling market optimism. This increase of 1.3% within 24 hours has reaffirmed Bitcoin’s position as the world’s largest cryptocurrency by market capitalization. The data also highlights impressive rates of coins being held (HODLed) and a sustained period of net gains in illiquid supply.

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Martin Reid

Martin Reid

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