Unorthodox Bitcoin Trend Could Trigger BTC Demand and Accelerate Price, Says Crypto Asset Manager CoinShares
A leading digital asset manager says the recent trend of Bitcoin (BTC) investors holding for the long term reveals two key insights.
In the latest Digital Asset Fund Flows Weekly report, CoinShares highlights how, unlike previous Bitcoin four-year cycles where investors moved their BTC to exchanges to take profits, the “class of 2017” sold less in 2021 than expected.
“In both the 2013 and 2017 bull periods, large positive net inflows have coincided with declining Bitcoin price levels (and declining average coin age), suggesting that many long-time Bitcoin holders took profits during the cyclical upswing.
However, recently we have seen that even though some investors actually decided to move coins to exchanges and realize gains at the 2021 market tops, the outflows from the exchanges have far outweighed the inflows. This suggests that a long-term trend is in place.”
CoinShares also notes that nearly a quarter of Bitcoin supply remains dormant, and the next wave of demand from new investors could propel the crypto king back up the price charts.
“The lack of inflows into exchanges since 2020 indicates that perhaps the 2017 class of Bitcoin investors are the most steadfast savers of any group initiated by the market-expanding halving events.
With 24% of circulating supply (or 4.6 million BTC) now idle, along with the trending decline in exchange liquidity, investors can be encouraged that any event that catalyzes significant new investor demand is likely to accelerate the Bitcoin price.
The data analytics firm says the long-term holdings trend suggests Bitcoin may have matured from a speculative asset to a wealth preserve.
“We think what we are observing is that users are increasingly using Bitcoin as a long-term savings tool, and less as a short-term speculative object.
It also suggests increased perceptions of system maturity and decreased perceptions of systemic risks among users who are apparently increasingly comfortable using Bitcoin as a long-term store of value.”
The firm adds one caveat, pointing out how the funding of Bitcoin via mainstream investment vehicles means people can now gain exposure to BTC without owning the asset directly.
“However, cautious investors should monitor changes in market structure that dilute the effect of any Bitcoin supply constraints, such as increasing evidence of rehypothecation or the market’s exposure to synthetic Bitcoin products.”
At the time of writing, Bitcoin is down a fraction and is trading at $21,535.
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Featured image: Shutterstock/Ekaterina Glazkova
