Bitcoin Active Supply Increases as Long-Term Holdings Begin to Move Assets
2 minute read
Market activity surrounding Bitcoin (BTC) has increased since spot Bitcoin ETFs were approved by the US Securities and Exchange Commission (SEC).
A recent market report from Bitfinex shows a slight increase in the amount of BTC in circulation. Long-term investors are holding on to more assets, causing the Bitcoin price to rise above $46,000.
The report looked at the “Supply Last Active” and other metrics used to show the circulating supply of Bitcoin between multi-year periods and how it affects current price fluctuations.
A key factor in the slight increase in circulation is the approval of spot Bitcoin ETFs, which have brought dormant Bitcoin back onto the market.
The months leading up to the approval date of January 11th were marked by massive inflows into the market, with many analysts predicting rising prices.
Recent market activity has narrowed the gap between Bitcoin’s stored supply and active supply and has been steadily growing due to ETF-related factors. Per Bitfinex:
“This movement in older Bitcoin supply is an important indicator of market behavior, particularly among long-term holders.” It reflects the changing sentiment and strategy of these investors, who are most likely reacting to market developments such as the launch of Bitcoin ETFs or reassess their positions in light of current market conditions.”
Analysts suggest Bitcoin’s days of value are being destroyed due to supply shifts.
The Value Days Destroyed (VDD) metric is used to predict when the price of Bitcoin has increased in bull cycles and is calculated by multiplying the asset price by the value of coin days destroyed.
There is currently an increase in VVD, which suggests that some investors are dumping their assets. Historically, VVD tops precede price spikes that are almost similar to bear market sell-offs.
However, the liveliness metric remains at multi-year lows, showing that certain holders will hold on to their assets to make a higher profit as the price collapsed immediately after the spot Bitcoin approval.
“This suggests that a significant portion of the Bitcoin supply remains in short supply.” The reasons for this may vary: holders may be waiting for higher spot prices before deciding to sell, or they may be looking for one increased market volatility as a catalyst for the issuance of their coins.”
The upcoming halving is another factor causing the recent Bitcoin price movements.
Miners listing their Bitcoin reserves on exchanges suggests a tendency to sell leveraged assets to improve capacity and efficiency ahead of the halving.
