November 27th Bitfinex Alpha | Bitcoin supply remains flat despite rising demand pressure
On Bitfinex Alpha
This week Bitfinex AlphaWe analyze a variety of metrics that show that we continue to see great confidence among Bitcoin holders to hold their positions, even as the price continues to hit new highs this year.
An unprecedented 13.65 million bitcoins, roughly 70% of total circulating supply, have not been traded or moved in over a year, a new all-time high. Additionally, the number of BTC that has not moved in over two years now stands at approximately 11.2 million, or nearly 60%. This surprising supply inactivity represents an important basis for prices and a source of upward pressure as growing demand chases limited supply.
The current Bitcoin velocity, which measures how often Bitcoin is traded or used for transactions, also remains at a historically low level of 15.78. This represents a significant change in sentiment compared to the last bear market cycle, when Bitcoin velocity peaked at around 80. Therefore, it is not surprising that BTC holders reached a new year-to-date high of $38,410 on November 24th. Reluctant to sell, buyers look for supply. It is estimated that 83.7% of current holders are making a profit, but selling pressure is still weak. One reason is that the true scale of these unrealized gains is not yet large.
As the holdings of long-term holders (LTH) increase to all-time highs, we see the supply of short-term holders (STH) decline to all-time lows. This contrast between LTH and STH supply reflects a market where the long-term holder base continues to strengthen and speculative trading declines.
The clear story we see in the cryptocurrency market stands in sharp contrast to the sometimes quite contradictory signals emerging from the U.S. economy. For example, the notable decline in reported business equipment spending has been interpreted as a direct result of the current high level of interest rates. But even though this is a clear indicator of caution, the labor market remains tight, with the number of new jobless claims reported last week falling a very surprising 10.3%, reaching levels well below pre-pandemic levels.
Likewise, the housing market has seen a sharp decline in existing home sales, reaching its lowest point since 2010. This is another casualty of the highest mortgage rates in 20 years coupled with limited housing supply. And consumers remain cautious about future prospects. The University of Michigan’s Consumer Sentiment Survey found that inflation expectations are rising.
Not surprisingly, the dollar has been very volatile over the past week, falling to its weakest level since late August before bouncing back to intraday gains not seen in weeks.
Of course, the news this week was about the fine agreed to by Binance and its CEO Changpeng Zhao, pleading guilty to money laundering, sanctions violations, and financing terrorist activities. While it’s not entirely positive for the market, it’s worth noting that the Bitcoin price barely moved on the news.
Meanwhile, in jurisdictions such as Hong Kong, more cryptocurrency companies are being granted licenses to bring them under regulatory oversight. The most recent beneficiary is Victory Securities, which became the first firm to be approved by the Securities and Futures Commission and licensed to provide both trading and advisory services.
The adoption of digital asset technology continues in the UK. The Investment Association announced that it is leading the way in integrating blockchain technology into asset management through tokenization to increase efficiency and transparency in the industry.
And South Korea announced the end of its CBDC pilot role, which included an experiment with a mock carbon emissions trading system that demonstrated a forward-thinking approach to financial technology.
Happy trading!