Reflecting upon the latest data from blockchain analytics firm Glassnode, a whopping 13.3 million Bitcoin (BTC), valued approximately at $388.7 billion, has remained inactive within the blockchain for an entire year. This makes up roughly 68.54% of the total circulating BTC supply of 19,451,256. Many analysts, including those from the cryptocurrency exchange Bitfinex, interpret this data as a distinct bias towards holding BTC for long-term gains. However, it’s important to consider that this dormant pool may include some lost coins.
Interestingly, records show an all-time high in BTC activity stagnancy two weeks ago with 69.2% supply inactive. Additionally, the percentage inactive for at least two years recently jumped to a record 56%, a good chunk (40%) remained stagnant for three years or more. These dormant coins are ones that have not been spent on-chain during the relevant period.
The steadily increasing number of dormant coins hints at a possible reduction in market supply, which under the right conditions could trigger a sharp price rally if demand subsequently strengthens. The current figures illuminate an accumulation strategy heavily favored by long-term holders indicating their robust belief in Bitcoin’s long-term value, despite the renowned downturns in the cryptocurrency market over the previous year.
However, these positive interpretations must be tempered by the overlooked aspect of Bitcoin’s so-called financialization over the years. This term refers to the evolution in potential investment methods for Bitcoin. Numerous investment vehicles have emerged over time, including the CME’s cash-settled futures, spot, futures-based exchange-traded funds (ETFs). These alternatives allow for exposure to the cryptocurrency without actual ownership, thereby becoming popular liquid tradeable proxies that also affect Bitcoin’s market price.
To conclude, while the recent data paints a potentially bullish picture for the future of Bitcoin, it’s important to ponder on the multifaceted dynamics shaping the cryptocurrency market and how these ripe conditions for an upswing could be disrupted by factors such as the increasing financialization of Bitcoin. After all, till now the consensus tilts towards optimism, only time will truly reveal the final outcome for Bitcoin’s market.
Source: Coindesk
