Bitcoin’s active supply is increasing as long-term holders begin transferring assets.

Recent Bitfinex Market Report Shows Slight Rise in Circulation of Long-Term Inactive Bitcoin

David Pokima

Last updated: February 9, 2024 11:11 EST

2 min read

Source: Dalle-3

Market activity around Bitcoin (BTC) has increased since the approval of spot Bitcoin ETFs by the United States 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, spurring a Bitcoin price growth above $46k.

The report dived into 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 swings.

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A significant factor in the slight increase in circulation is the approval of spot Bitcoin ETFs which saw dormant Bitcoin re-introduced to the market.

The months leading up to the approval date, Jan 11, were characterized by massive inflows into the market, with many analysts predicting surging prices.

Recent market activity has reduced the gap between the stored Bitcoin supply and the active supply, increasing steadily based on ETF-related factors. Per Bitfinex:

“This movement of older Bitcoin supply is an important indicator of market behavior, especially among long-term holders. It reflects the changing sentiment and strategies of these investors, who are most likely responding to market developments like the introduction of Bitcoin ETFs or reassessing their positions in light of current market conditions.”

Analysts Point to Bitcoin Value Days Destroyed As Supply Shifts

The Value Days Destroyed (VDD) metric is used to project when Bitcoin’s price has heightened in bull cycles and is calculated by multiplying the asset’s price by the Coin Days Destroyed value.

At the moment, there is an increase in VVD, indicating that some investors are offloading their assets. Historically, VVD highs precede price peaks almost similar to the bear market sell-offs.

However, the liveliness metric remains at multi-year lows, showing that certain holders will keep their assets to make a higher profit since the price plunged immediately after the spot Bitcoin approvals.

“This suggests that a significant majority of the Bitcoin supply continues to be tightly held. The reasons for this could vary: holders may be waiting for higher spot prices before they decide to sell, or they might be looking for increased market volatility as a catalyst for spending their coins.”

The upcoming halving is another factor causing recent Bitcoin price movements.

Miners introducing their Bitcoin reserves to exchanges indicates an inclination to sell off leverage assets to improve capacity and efficiency ahead of the halving.

Q&A

Q: What is the significance of the approval of spot Bitcoin ETFs?

The approval of spot Bitcoin ETFs has led to an increase in the circulation of Bitcoin. This move has caused long-term holders to start moving their assets, resulting in a growth in the Bitcoin price above $46k.

Q: How does the movement of older Bitcoin supply indicate market behavior?

The movement of older Bitcoin supply reflects the changing sentiment and strategies of long-term holders. It indicates how they are responding to market developments such as the introduction of Bitcoin ETFs and reassessing their positions in light of current market conditions.

Q: What is the Value Days Destroyed (VDD) metric and its implications?

The Value Days Destroyed (VDD) metric projects heightened Bitcoin prices in bull cycles. Currently, there is an increase in VVD, indicating that some investors are offloading their assets. However, the liveliness metric remains low, suggesting that many holders continue to tightly hold their Bitcoin assets.

Q: What is the upcoming halving and its impact on Bitcoin price movements?

The upcoming halving refers to a reduction in the amount of new Bitcoin entering circulation. Miners introducing their Bitcoin reserves to exchanges indicates a willingness to sell off assets ahead of the halving. This could improve their capacity and efficiency, potentially affecting Bitcoin’s price.

Future Outlook and Investment Recommendations

The recent increase in Bitcoin activity, driven by the approval of spot Bitcoin ETFs, indicates a growing market sentiment. It is essential to monitor the movement of older Bitcoin supply and the Value Days Destroyed metric to further understand market behavior.

While some investors are offloading their assets, the majority of Bitcoin supply remains tightly held. This suggests that many holders are waiting for higher spot prices or increased market volatility before deciding to sell.

Considering the upcoming halving and its potential impact on Bitcoin’s price, investors should carefully evaluate their investment strategies. Navigating market dynamics and staying informed about market trends will be crucial for making informed investment decisions.

To learn more about the topic, you can check out the following links:

1. Matrixport Founder Says Dissemination of Bitcoin ETF Report Is Beyond Control
2. Bitcoin ETF Approval Frenzy Begins: SEC Finally Approves First Spot Bitcoin Funds
3. Bitcoin Price Rally Breach $50,000
4. Bitcoin Miners Offload $129M BTC per Day
5. Follow Us on Google News

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