- Down over 30% from its record near US$69,000 in November last year, examination of the Bitcoin blockchain appears to suggest that more investors are “hodling” for longer amounts of time than before.
- About 57% of bitcoin currently in circulation hasn’t moved from addresses in over a year, a sign of long-term holders.
While it’s arguable that bitcoin has no buyer of last resort, it also helps that it has no shortage of “hodlers” who will at no resort sell.
This clutch of “hodlers” in cryptocurrency parlance, have proved a stabilizing force for bitcoin, despite the benchmark digital asset still well off its all-time-high.
Down over 30% from its record near US$69,000 in November last year, examination of the Bitcoin blockchain appears to suggest that more investors are “hodling” for longer amounts of time than before.
In essence, speculators are turning into investors, adding bitcoin to their portfolio as part of a holistic approach to managing their investments.
About 57% of bitcoin currently in circulation hasn’t moved from addresses in over a year, a sign of long-term holders.
But holding bitcoin in and of itself doesn’t do much to affect price.
Given the volume of derivatives available, the notional movement of bitcoin far exceeds the actual traded underlying asset and that can still contribute to significant amounts of volatility, even when the sales and/or purchases are relatively muted.
Since the dawn of cryptocurrencies, “hodling” has been a time-tested strategy that thus far, has consistently paid out in spades and the increasing amount of illiquid supply of bitcoin is why the cryptocurrency’s daily price movements appear to mimic other risk assets.
While long-term “hodlers” appear to be accumulating during dips, short-term traders view and trade bitcoin like it’s any other risk asset, with their movements driving daily price volatility that appear to react to macro trends like inflation data and interest rates.
Yet since last July, there has been a steady transfer of bitcoin from short-term traders to long term holders, likely as more institutional investors hold at least a portion of their assets in the cryptocurrency.
In fact, examination of data from Glassnode, which provides blockchain analysis, reveals that the amount transferred from liquid (“hot” wallets) to illiquid (“cold” wallets) has increased.
To be fair, if the current timeline was a reflection of 2017, bitcoin ought to have crashed to around US$20,000 by now, but it hasn’t.
And while that’s not to say that bitcoin isn’t due for a sharp correction, the odds of that are increasingly unlikely as the base of staunch bitcoin maximalists appears to be growing and the recent leverage liquidations hasn’t caused a dip below the US$40,000 level.
If nothing else, bitcoin has traded range-bound over the past several weeks, while bitcoin’s so-called “dormancy flow” a measure of the number of days since a bitcoin was last sold, is flashing historically bullish.
Volatility for bitcoin as a whole has also trended downwards, with the cryptocurrency’s 90-day volatility on the decline, which could be interpreted as a consolidating bull market.