According to a Bitfinex Alpha report this week, the significant decline in the supply of inactive bitcoins that haven’t moved in more than a year indicates that long-term holders are continuing to reduce their holdings or move assets off exchanges.
“The fundamentals of Bitcoin price dynamics are this week’s halving. As the halving approaches, there has been a noticeable surge in Bitcoin on centralized exchanges and an 18-month supply of inactive Bitcoin that has not moved in more than a year has been reduced to low.” Go Bitfinex analysts said:
The report added that the current behavior of Bitcoin holders is similar to their behavior in December 2020, just before the significant rise in the Bitcoin market. “These patterns suggest that we are entering a similar phase of growth,” the analysts added.
Bitcoin exchange holdings are at the lowest level in years
The decline in the supply of long-term holders on exchanges observed by Bitfinex is consistent with data from CryptoQuant. According to the chart, Bitcoin exchange holdings have reached an all-time low recorded by CryptoQuant data since early 2021.
In July 2021, Bitcoin exchange holdings were around 2.8 million, but have now fallen to around 1.94 million. This means that approximately 862,000 bitcoins have been lost since CryptoQuant started recording this indicator.
Bitcoin 
BTC
-5.27%
Exchange holdings fell to the lowest level on the CryptoQuant chart. Image: CryptoQuant.
Markets turn their attention to halving
After Monday’s sell-off, the upcoming halving event has left the Bitcoin market at a crossroads. The Bitfinex report said that indicators are emerging to suggest that traders’ attention has turned back to the upcoming halving, with funding rates now stabilizing after a large liquidation event in the past two days led to a sharp decline in prices.
According to Timo Lehes, co-founder of Swarm Markets, the halving event involves some forward-looking pricing in the market and now requires some caution as prices may fall.
“There is still potential for price discovery, especially with added geopolitical volatility causing unexpected price softening in the near term,” Lehes said in an email to The Block.
Upcoming Bitcoin Halving Event
Every four years, a mechanism coded into the Bitcoin blockchain halves the block reward miners earn. This time, it means that each new Bitcoin block mined roughly every 10 minutes generates 3.125 BTC.Currently down from 6.25 BTC Block reward.
According to The Block’s Bitcoin Halving Countdown page, based on current estimates, the halving will occur on April 20, 2024 at 03:48 UK time, once the network reaches block height 840000.
Historically, many of Bitcoin’s gains occurred 12 to 18 months after the halving. At this time, the newly declining supply was accompanied by a surge in demand. For example, at the time of the halving in 2020, the price of one Bitcoin was less than $10,000. At its peak in 2022, the price rose to over $67,000.
This is the first time a halving has occurred due to the emergence of spot Bitcoin ETFs and strong inflows.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.