The new report outlines the underlying conditions driving bitcoin price increases now and what the data tells us to help better inform investment and trading decisions.
Liquid Bitcoin is Only 23%
An analysis of bitcoins held in various wallets shows that illiquid or investor-held bitcoin (wallets that send less than 25% of holdings) currently stands 77% of the circulating supply. Compared to 2017, the amount of liquid bitcon is similar. However, the amount held in illiquid wallets is much higher at 77% (14.8 million bitcoins). These are bitcoins that have not moved from their current addresses in the last 5 years or longer.
Current Demand is Largely Driven by Institutions
Unlike the 2017 bull run, which saw bitcoin reach an all-time value of $20, 000, was driven by individuals and retail invstors buying their own personal funds, 2020 is the year institutional dollars began flowing into bitcoin. The 2020 bull run appears to be driven by a desire to hedge against macro-economic uncertainty, as data reveals. This is evidenced by high value transfers sent fro exchanges throughout 2020. The fact that individuals behind these large transfers have more money to spend means that they are likely going to keep doing that as quantitative easing increases.
Crypto-to-Fiat Exchanges are Playing a Big Role
Prior to the 2017 bull run, many exchanges where primarily large institutional investors are located (North America & Europe) were losing bitcoin on net, and became net recipients when prices began to peak. However, this time, its different. The 2020 bull run has seen increased inflows into these exchanges within these jurisdictions further enabling higher crypto-to-fiat trades compared to 2017. As a result, these crypto-to-fiat exchanges are playing a bigger role in the current surge compared to 2017 when crypto-to-crypto exchanges, mostly used by traders for swapping different crypto types, drove the market.
It is clear that investors are looking at bitcoin as a safe haven especially when you compare Ethereum with bitcoin. As more bitcoin becomes illiquid and held in long-term wallets, Ethereum, on the other hand, is becoming more liquid, as it is moved into newer wallets that trade more frequently, largely driven by the Decentralized Finance (DeFi) frenzy.
There is no doubt that the reasons why bitcoin prices are rising make for a good business and use case for the crypto asset.
Below are the conclusions drawn from the report:
2020 investors are more savvier and more strategic
Bitcoin is getting accumulated for a specific use case rather than speculation
Continued effectiveness of bitcoin as a hedge will likely lead to even more mainstream adoption