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Bitcoin

60% of Bitcoin supply held as digital gold by investors

  • Data Analysis Firm Chainalysis published a report on the behavior of Bitcoin (BTC) investors and on the whereabouts of the BTC supply.
  • The report determines that 60% of the BTC supply is maintained by investors as a safe haven, another 20% is “lost Bitcoin”. 

The data analysis firm Chainalysis has published a report on the whereabouts of the Bitcoin supply since the first block was mined by its creator, Satoshi Nakamoto. Specifically, the report provides an overview of the data that exists on the ownership and trade in Bitcoin.

Most Bitcoin supply is used as a store of value

According to the analysis firm, 18.6 million Bitcoins have been mined as of the publication date of the report. Of that amount, approximately 60% is held by institutions, individuals or businesses that have never sold more than 25%. In that sense, Chainalysis determines that these investors have maintained their BTCs for many years and consider Bitcoin a long-term investment.

Another 20% of BTC’s supply has been sitting still in directions for more than 5 years, and therefore the data analysis firm considers them “lost Bitcoins”. The other 19% of all already mined Bitcoin moves frequently between the different exchanges and constitutes the Bitcoin trading market, as can be seen in the graph below.Bitcoin BTC

Source: https://blog.chainalysis.com/reports/bitcoin-market-data-exchanges-trading

Chainalysis concludes the following:

The data shows that the majority of Bitcoin is held by those who treat it as digital gold: an asset to be held for the long term. But this digital gold is supported by an active trading market for those who prefer to buy and sell frequently. The 3.5 million Bitcoin used for trading supplies the market, and, in interaction with the level of demand, determines the price.

In addition, the firm predicts that there will be an increased need to inject more Bitcoin into the trading market. Especially after the Bitcoin halving that will make the asset even scarcer over time. Therefore, Chainalysis expects to move more Bitcoin from investors’ reserves to trading as a way to provide liquidity to the market. However, this will only happen if the price of Bitcoin reaches a level that long-term investors find attractive to encourage the sale of the cryptocurrency.

Chainalysis also determined that of the millions of Bitcoin holders, only 340,000 are active weekly BTC traders. The data allows Chainalysis to divide those traders into two groups: retailers and professionals, as shown in the graph below.Bitcoin BTC

Source: https://blog.chainalysis.com/reports/bitcoin-market-data-exchanges-trading

According to this chart, retailers trade less than $10,000 of BTC on exchanges and constitute 96% of all transfers to these platforms on a weekly basis. At the same time, professional traders control the liquidity in the market and account for 85% of the total US dollar value in Bitcoin. Chainalysis further describes:tates:

(…) professional traders are the most significant contributors to large market movements, such as those seen during Bitcoin’s dramatic price decline in March as the Covid-19 crisis intensified in North America. However, professional traders are few in number, moving all that value in just 39,000 transfers per week on average in 2020.

At the of writing Bitcoin trades at $9,353 with a slight gain of 0.37% in the last 24 hours. Over the past week, BTC has remained relatively stable in the range of $9,300 to $9,500. Bitcoin is at a crossroads and analysts have not reached a consensus on whether its performance in the coming days will be bullish or bearish.

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