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Crypto Market Analysis: Majority of Bitcoin Supply Owned by Long-Term Holders, with Only a Minor Share Held by Short-Term Holders

Bitcoin and the digital assets market are currently experiencing increased volatility, according to Matteo Greco, a Research Analyst at Fineqia International. Bitcoin’s price closed last week at $25,850, a slight decrease from the previous week. This is part of a larger trend of low volumes and volatility observed in the market during this quarter. In the past 11 weeks, Bitcoin’s price has fluctuated by less than 0.75% in 8 of them.

The low volatility can be seen when looking at the annualized volatility of Bitcoin on a 30-day basis, which is currently at one of the lowest levels ever recorded. Despite some strong fluctuations in August, including an 11% price decrease, the volatility remains low. Trading volumes on centralized exchanges are also at their lowest level since the end of 2020, with a cumulative weekly volume of $9 billion.

The ratio of spot to futures volumes has slightly increased in recent weeks, reaching the same level as seen in April. Low futures volume tends to be correlated with lower volatility. The trend of low traffic is also seen on decentralized exchanges, with the main ones totaling $22 billion in volume in August, the lowest monthly volume since December 2020.

Analyzing the Bitcoin supply, it is found that over 75% of the total supply is held by long-term holders, referring to the part of the supply that has not moved for more than 155 days. Currently, 75.66% of the total supply, equivalent to 14.74 million BTC, is held by long-term holders, while only 2.50 million BTC is held by short-term holders, the lowest data since 2011.

The low trading activity and market participation in Q3 is a historical trend, as this quarter includes the months of July and August, which have traditionally had very low volumes. The hike in interest rates by central banks in the past 18 months has also contributed to drying up liquidity in financial markets and has led to a de-risk movement for investors. This has particularly impacted the digital asset market, which is known for its volatility and risk.

The US will release its August inflation data on September 13th, with expectations for a slight increase in year-on-year inflation. However, the market does not expect any further increase in interest rates and predicts no change at the next Federal Open Market Committee meeting, nor any further rate hike before the end of 2023.

The end of rate hikes, especially if combined with the approval of a Bitcoin Spot ETF, could bring new capital into the market and improve liquidity. Investors are increasingly confident in the future approval of Spot ETFs. The Grayscale Bitcoin Trust currently has a discount of around 17%, the lowest level in 2022, while the Grayscale Ethereum Trust’s discount is also decreasing and is now at 26.50%, the narrowest in the last 12 months. This suggests that investors believe the approval for a Bitcoin Spot ETF is more likely and that other Trusts will follow suit.

Fineqia International is a digital asset business that focuses on investing in early and growth stage technology companies. It also provides a platform for managing debt securities issuance in the UK. The company is publicly listed in Canada and has offices in Vancouver and London. Its investment portfolio includes businesses involved in tokenization, blockchain technology, NFTs, AI, and fintech.

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