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Bitcoin's Liquid Supply Hits All-Time Low Amid Market Optimism

Explore the dynamics of Bitcoin's liquid supply reaching a new low as long-term investors accumulate and market optimism rises.
Published on 2023-11-08

Bitcoin's Liquid Supply Decline

Bitcoin's liquid supply reached an unprecedented low on November 8, 2023. This decline is largely driven by long-term investors, who have amassed a record 15.4 million bitcoins in minimally active wallets. The illiquid supply, representing bitcoins with little spending history, surged by over 71,000 monthly.

Market Dynamics and Price Influence

The current Bitcoin price levels are crucial, with most short-term held coins becoming profitable after surpassing $30,000. This profitability affects short-term holders' spending behavior, potentially leading to a shift in ownership if the price drops from the present $35,272.

Long-Term vs. Short-Term Holders

A notable gap is emerging between long-term and short-term holders. Approximately 68% of Bitcoin has remained dormant for over a year, and nearly 30% for over five years. Long-term holders typically release their assets during market highs, as seen in the 2021 bull run, which saw a decrease in their supply.

Investor Optimism and Future Projections

Investors are optimistic, expecting Bitcoin to break previous records, driven by possible spot Bitcoin ETF approvals and the upcoming April 2024 halving. This optimism is supported by Bernstein's prediction of Bitcoin reaching $150,000 by mid-2025.

Increasing Self-Custody and Market Indicators

In anticipation of the halving event and potential ETF approvals, self-custodial wallet supply has risen, with over 1.7 million bitcoins moved from exchanges since May 2021. The Hodler Net Position Change indicator shows ongoing accumulation by long-term holders, with smaller groups also increasing their holdings since late October.

Current Market Sentiment

Bitcoin's price recently surpassed $35,000, reflecting market optimism. The Fear and Greed Index indicates positive sentiment, with Bitcoin's value rising by 1.3% in 24 hours to $35,272. This aligns with a multi-year trend of net gains in illiquid supply, highlighting Bitcoin's strong market position.

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