Jamal Al-Farouq Recent insights from Glassnode’s examination of onchain metrics reveal a growing illiquidity in the bitcoin supply. Notably, even with significant increases in bitcoin’s market price this year, the prevalence of dormant bitcoins has hit both multi-year and never-before-seen highs.
Bitcoin’s Escalating Value Contrasts with Shrinking Liquid Supply, Glassnode Reveals
Analyzing the past year, bitcoin has witnessed a 71% climb and recorded a 114% increment from the commencement of the year to the present. Yet, the findings in Glassnode’s report suggest a pronounced scarcity in bitcoin’s availability, with a preference for retention over selling among investors.
Delving deeper, the onchain analysis discloses that the proportion of bitcoin lying dormant for over a year has reached 68.8%, while the non-liquid supply index has escalated to an all-time high of 15.4 million BTC. Glassnode has identified a trend where the reserve of bitcoins in the grasp of long-term holders is nearing an apex, as the portion held by short-term traders has drastically reduced to levels never seen before.
Glassnode has articulated that the widening differential highlights a consolidation in supply, as investors demonstrate a heightened hesitancy to liquidate their stakes. Since July 2022, the divide between long-term holders and new entrants’ supplies has burgeoned, accentuating the profound divide between inactive and active supplies.
Additionally, Glassnode’s newly minted Activity-to-Vaulting Ratio metric has depicted a downward trend from June 2021, with a conspicuous dip following June 2022. This metric’s downturn suggests a decline from the fervent market activity characteristic of the 2021-22 cycle.
The analysis of spending behaviors suggests a pattern of persistent accumulation and holding by investors, rather than frequent trading. Although the Sell-Side Risk Ratio for short-term holders spiked post-rally, indicating some immediate profit realization, the same ratio for long-term holders remained relatively subdued, reflecting historical trends.
In terms of wallet activity, Glassnode’s study observes noteworthy increases in holdings across diverse wallet categories, pointing to rising investor assurance. Notably, “Shrimps” and “Crabs” have accumulated 92% of the mined bitcoins since May 2022, with “Shrimps” possessing under one bitcoin, “Crabs” owning 1-10 BTC, and “Fish” with holdings of 10-100 BTC.
In their conclusive remarks, Glassnode analysts state that the supply of bitcoin is “historically tight with several supply indicators reaching multi-year or even all-time highs in terms of ‘coin inactivity.’ This highlights the extent to which the [bitcoin] supply is firmly held, which is noteworthy considering the robust price appreciation seen [year-to-date].”
We invite you to discuss Glassnode’s findings on the tightening bitcoin supply dynamics. Please share your analyses and views on this topic in the comments section.
