The statistic highlights the utility of BTC as a long-term investment, especially in times of macroeconomic instability
As was expected, the Presidential elections in the United States brought about volatility and wild moves in all segments of the financial markets — including Cryptocurrencies, led by Bitcoin (BTC). It took the premier digital asset almost three years to get to the level we are seeing right now. At the time of publishing, BTC is trading around $15.4k. It almost touched $16k earlier — a price level that was last seen in Jan. 2018.
It has been a great comeback story for the digital asset. Many had written it off as a fad, while others equated it with the tulip mania of the 17th century. To tell you the truth, even many of the die-hard fans were losing faith when it lost 70% of the value — reaching as low as $3100 in Dec. 2018. It made a nice comeback in 2019 before turning lower again later that year. And the scare was repeated again when the pandemic hit earlier this year. Bitcoin saw an impulsive fall in the region of $3900.
Ever since that day in March, it has been a relentless bull ride for Bitcoin. Very few financial assets would be able to match its over 300% gains. But an even more interesting statistic has emerged from the exponential rise — that BTC is now seen as an asset to hold in a world of macroeconomic uncertainty. The ballooning interest from the institutional investors not only reinforces this rhetoric but is also fuelling FOMO (Fear of Missing Out) — where a growing number of people are willing to buy Bitcoin even at higher prices.
As more investor grade bitcoin occupies the Crypto space, the less there is available to buy. As demand increases, the scarcer supply leads to higher prices. This makes bitcoin an increasingly attractive asset, leading to yet more demand, even scarcer supply, and higher prices. This explains the astronomical growth in the price we have seen in bitcoin recently.
The chart above highlights this fact. According to the Chainlysis Market Intel, bitcoin held in wallets that send less than 25% of the bitcoin the wallet receives, typical investor behavior, account for 77% of available supply. Available supply being the 14.8 million bitcoin that is mined and not lost.
Bitcoin held by investors has increased 32% since the start of 2017, with growth in investor holdings accelerating from mid-March 2020. While the investor Bitcoin currently (orange line above) has overtaken the levels seen in Dec. 2017, BTC available to trade, on the other hand, is currently as low as it was in mid-2017 — shown by the yellow line in the chart above.
The research suggests that new entrants to the Crypto market will be buying from a float of 3.4 million bitcoin held by traders. Alternatively, they will have to offer the price to investors which would entice them to sell. Either way, Bitcoin is entering a new era.
Originally Published on Medium
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