Bitcoin, the leading cryptocurrency, is undergoing a historic supply squeeze. More investors are now holding onto their coins “for dear life” or the long term.
According to Glassnode, an esteemed on-chain data and analysis provider, a significant portion of the circulating Bitcoin supply has been held for over a year, nearing all-time high levels. This surge in long-term holdings indicates that current Bitcoin holders are increasingly hesitant to part with their coins, even as the cryptocurrency’s price surged to new local heights in recent days.
Illiquid Bitcoin Supply Stays Put
Glassnode’s report also highlights the record-breaking illiquid supply of Bitcoin. It measures the number of coins held in wallets that rarely see any activity.
It now stands at an impressive 15.4 million BTC. Meaning, there are only about 21% of the total circulating supply, or approximately 4.1 million BTC, available for trading on the market. This metric has been on a steady rise, with 1.7 million BTC remaining inactive since May 2021, when investors started withdrawing their holdings from exchanges, opting for secure cold storage or custody solutions.
This tightening of the Bitcoin supply is a bullish sign for the cryptocurrency, as it suggests that demand is surpassing supply. Interestingly, Glassnode points out a substantial divergence between long-term and short-term holders. Basically, long-term holders are on the rise, while short-term holders are dwindling.
This shift in spending behavior of short-term holders became evident after Bitcoin broke above the pivotal $30,000 threshold, which has now become a key zone of interest for bullish sentiment.
Factors Driving Bitcoin’s Rising Demand
Several factors are contributing to the surge in Bitcoin’s demand and price. One major catalyst is the anticipation of the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States.
A spot Bitcoin ETF would enable investors to buy and sell Bitcoin directly through a regulated platform, circumventing the technical and security complexities of cryptocurrency ownership. Currently, several applications for a spot Bitcoin ETF are awaiting approval from the US Securities and Exchange Commission (SEC).
However, the supply squeeze is not the sole driving force behind the Bitcoin market’s momentum. In October, spot trading volume on centralized exchanges marked its first increase in four months. It reaches $632 billion, according to CCData, or $516.43 billion, according to The Block. This milestone signifies the highest monthly spot trading volume since March 2021, accompanied by the most substantial month-on-month growth since January 2021.
Bitcoin’s supply squeeze and the changing dynamics of its holders have created a favorable environment for the cryptocurrency. The surge in long-term holdings, paired with a diminishing supply of available coins, indicates a strong bullish sentiment in the market. Additionally, the potential approval of a spot Bitcoin ETF in the US holds promise for attracting more institutional and retail investors.
Bitcoin Battling the $36,000 Top
For the past few weeks now, Bitcoin has maintained a north-ward trend, culminating in a peak at the $36,000 mark for the first time since May 2022. At the time of this writing, BTC was trading just under this critical level as bulls across the market piled on long positions.
That said, if the current market mood persists in the near term, we can expect to see Bitcoin reclaim the $37,000–38,000 top in the coming days. However, traders need to exercise some caution as the benchmark cryptocurrency has been in overheating conditions for a while now.
BTC Statistics Data
BTC Current Price: $35,610
Market Cap: $696.3B
BTC Circulating Supply: 19.5M
Total Supply: 21M
BTC Market Ranking: #1
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