Despite Bitcoin (BTC) reaching new price highs in 2023, a significant amount of BTC supply remains untouched, reflecting a growing trend of investors hesitating to sell their holdings. This phenomenon is evident in the increasing number of dormant BTC addresses that have not been active for at least a year. While this trend could be attributed to various factors such as accumulation, long-term holding, or institutional buying, it has implications for the cryptocurrency market and the perception of Bitcoin as a decentralized currency. This article delves into the significance of the growing dormant BTC supply and its potential impact on price action and market dynamics.
The Rise of Dormant Bitcoin Supply:
Industry analyst Will Clemente recently observed a continuous rise in the amount of Bitcoin supply that has remained inactive for at least a year. Notably, this trend persists despite the significant market events of the past year, including the drop in BTC prices to $20,000 following the Luna collapse. This finding highlights the increasing number of “hodlers” who are holding onto their Bitcoin assets, refusing to sell even in the face of price appreciation.
Long-Term Holders and Institutional Accumulation:
In addition to the rise in dormant Bitcoin supply, there are over 1 million addresses referred to as “wholecoiners” that hold more than 1 BTC. This suggests that there is a significant number of individuals and entities committed to long-term Bitcoin holding. Furthermore, the supply available for trading has declined since the third halving in May 2020. This decline could be attributed to a combination of factors, including accumulation by long-term holders and institutions buying and securing Bitcoin as a store of value. The reduced availability of Bitcoin for trading has the potential to positively impact price action, as the scarcity drives demand.
The Role of Bitcoin as a Store of Value:
Critics argue that holding Bitcoin as an investment or store of value goes against its intended purpose as decentralized money. However, proponents counter this argument by highlighting Bitcoin’s use as a hedge against high inflation and diminishing fiat currencies. MicroStrategy CEO Michael Saylor has likened Bitcoin to gold, emphasizing its role as a reliable store of value. This sentiment is further supported by the growing interest from institutional investors who recognize Bitcoin’s potential as a long-term asset.
Profitability of Short-Term Holders:
Recent data from Glassnode reveals that the recent BTC price surge from $25,000 to above $30,000 has resulted in approximately 1.8 million short-term holder coins entering a profitable zone. As a result, around 97% of short-term holder supply, equivalent to approximately 2.6 million BTC, is currently in profit. Historically, periods of high profitability for short-term holders have coincided with notable price surges and market exuberance.
BTC Price Outlook:
Bitcoin reached a new high of $31,185 in 2023, demonstrating significant price growth. However, resistance at this level remains substantial, leading to a 1.7% retreat to $30,224 during the Asian trading session. Despite this pullback, BTC is still up by 14% compared to the previous week, with renewed institutional interest and BlackRock’s ETF application playing a supportive role. If the resistance level cannot be breached, the formation of a double-top pattern may occur, leading to further consolidation and a potential retreat to lower support levels.
Conclusion:
The increasing amount of dormant Bitcoin supply reflects a trend of investors holding onto their BTC assets instead of selling them, despite new price highs. This behavior may be attributed to long-term holding strategies, institutional accumulation, or the use of Bitcoin as a hedge against inflation. While the growing dormant supply may limit the availability of BTC for trading, it also creates scarcity, potentially driving demand and influencing price action. As Bitcoin continues to evolve as both a store of value and a decentralized currency, market participants will closely monitor the interplay between hodlers, short-term holders, and the broader market dynamics to assess the future trajectory of Bitcoin’s price.
