January 15, 2024

Bitcoin Supply Shock: Over 57% of BTC Dormant for 2 Years, Signaling Potential Market Squeeze

Bitcoin may be on the verge of a supply shock, with on-chain data revealing that more than 57% of all BTC have remained inactive for at least two years.

The supply of BTC, untouched for a minimum of two years, has consistently marked new all-time highs in recent times.

This segment of bitcoin investors, characterized by their long-standing commitment to holding their assets, constitutes a significant portion of the broader long-term holder (LTH) group. LTHs are individuals who have retained their coins for at least 155 days.

A noteworthy observation is that the longer holders refrain from moving their coins on the blockchain, the less inclined they are to do so in the future. As a result, LTHs are often regarded as the steadfast segment of the BTC market.

HODL waves

Within the 2+ years timeframe, investors fall into a category that is exceptionally resilient even among HODLers, as their holding period far surpasses the 155-day mark.

Although the growth in this metric has recently decelerated, approximately 57% of the current bitcoin supply is held by these committed HODLers.

The holdings of these LTHs have consistently risen since the FTX collapse, reaching new all-time highs. As a result, long-term holders, whose bitcoin has remained stagnant for at least a year, now comprise about 70% of the total.

1+ year HODL waves

This trend could potentially lead to a significant supply squeeze for the cryptocurrency, a pattern observed in previous bull runs.

In the past week, the US SEC granted approval for spot bitcoin ETFs, potentially intensifying the supply shock as these ETFs are approved only for cash subscriptions, removing more bitcoin from the market with each purchase.

The percentage of bitcoin supply held in centralized exchanges' wallets has also decreased, with only around 10% of all BTC currently stored on these platforms. Given that exchanges are primarily involved in buying and selling activities, this decline indicates a reduction in the effective trading supply of the asset.

Exchange reserve

At the time of writing, bitcoin is trading at approximately $42,600, reflecting a gain of more than 105% over a one-year period.

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