In an unprecedented trend, the supply of Bitcoin is tightening as long-term holders refuse to sell, thus limiting the available coins in circulation. This behaviour, backed by Glassnode data, suggests a strong belief in the potential for higher prices in the future.
What the Data Shows
Based on a recent Glassnode report, nearly 68% of the circulating Bitcoin supply has been held for more than a year, reaching record highs. Moreover, almost 30% of the total supply has been untouched for over five years. This reluctance of seasoned Bitcoin investors to liquidate their holdings hints at a bullish outlook.
Long-Term vs Short-Term Holder Supply
Glassnode’s analysis shows a significant divergence between the supply of long-term and short-term holders. The latter is currently at multi-year lows, a pattern that Glassnode labels as “powerful.” The illiquid supply of Bitcoin, which refers to coins in wallets with little to no spending activity, also stands at an all-time high of 15.4 million BTC, increasing by approximately 71,000 BTC each month.
The Impact of Withdrawals from Exchanges
Interestingly, this increase in illiquid supply has occurred alongside a notable trend of investors moving their digital assets from exchanges to personal custody solutions. Since May 2021, over 1.7 million Bitcoin have been transferred from exchanges to self-hosted wallets, indicating a preference for personal security of holdings. This shift has resulted in a historically low circulating supply of Bitcoin.
Glassnode suggests that the recent surge above $30,000 may signal a change in market dynamics as short-term holder spending habits have evolved post this milestone. Many analysts consider $30,000 as a pivotal point that could trigger wider bullish sentiment. Given the extraordinarily tight supply dynamics, it would likely require significantly higher prices to shake loose considerable volumes from the grasp of long-term investors. These holders, who have been accumulating Bitcoin over the years, seem determined to weather any market volatility in anticipation of higher prices.
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The unwillingness of long-term holders to sell their Bitcoin is creating a unique supply-demand dynamic in the global market. As the world continues to grapple with economic uncertainties, the Bitcoin market is setting the stage for interesting times ahead.
