Long-term focus returns to the Bitcoin market
In the context of financial markets, bitcoin is not an old asset class, but in its still young life, the largest cryptocurrency has developed a reputation for big moves – both upside and downside.
As such, bitcoin has often been breeding ground for short-term speculators. In a hypothetical but not uncommon example, bitcoin could increase 7%, 8%, or 10% or more in a single day. For some market participants, intraday percentages like these are enough and they will move in and out of a bitcoin position within hours.
However, recent data indicates that crypto-investors are renewing their long-term view of bitcoin, opting to hold their coins for longer time frames rather than quickly moving in and out of trades. Recent analysis from blockchain data provider Glassnode indicates that nearly 15 million bitcoins have not moved in six months. That’s close to the high of 15.02 million views last December.
It’s a sign that some bitcoin holders are content to clap in anticipation of more gains. These data points are all the more encouraging considering the fact that digital currencies are performing admirably in the early stages of 2023.
“The Bank for International Settlements yesterday (February 23) released a report concluding that the investors who profit from buying the cryptocurrency are pro-traders and whales – that is, those who have a lot of it for a long time or have been smart enough to sell before significant declines.” reported Mat Di Salvo for Decrypt.
The Bank for International Settlements report points to another important factor that could contribute to the renewed long-term view of bitcoin. In past bull markets for the digital currency, many smaller investors entered the market at or near the peaks. They then endured significant, short-term declines and sold near the bottom, experiencing large losses.
As a result, chastened market participants who still believe in bitcoin may be more inclined to take a buy-and-hold approach this time around. It could also serve the purpose of taking some of the volatility out of the crypto market – a segment known for bouts of turbulence.
“Dormant coins actually become ‘increasingly unlikely to be used’ after a 155-day holding period, Glassnode has previously said. The research firm noted in its report today that such activity has previously been observed in previous bear markets,” potentially signaling a perception that the market is oversold” – meaning it could be poised for an upturn,” according to Decrypt.
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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.
