In an on-chain analysis, released on Tuesday (7), the company Glassnode noted that several factors are converging to create an optimistic environment in the cryptocurrency market.
The report highlighted that the Bitcoin halving is approximately 166 days away, and the possibility of an exchange-traded fund (ETF) approval in the United States is becoming increasingly likely.
These events are driving investor enthusiasm and sentiment towards BTC. But what makes this phase even more interesting is the realization that the supply of Bitcoin is exceptionally limited.
According to Glassnode, this is notable considering the robust price performance throughout this year, with the coin appreciating more than 100% in 2023 and reaching the highest levels in a year and a half.
Glassnode revealed that long-term investors are tightly holding their holdings, with most of these coins having not moved for a long time. Surprisingly, 68.8% of the total BTC supply has remained “immobile” for over a year, 57.1% for over two years, 41.1% for three years, and 29.6% for five years.
“Additionally, the illiquid supply metric, which measures the amount of BTC held in wallets with minimal spending history, reached a record high of 15.4 million Bitcoin,” Glassnode said.
Forecast for Bitcoin
At the same time, supply from short-term investors, who have held their holdings for less than 155 days, is at historically low levels. This trend demonstrates a growing shortage in the supply of BTC as existing holders are less willing to sell their holdings.
“Historically, long-term investors wait for the market to reach new highs before they start selling. This pattern was evident during the 2021 rally, with a notable decrease in supply from long-term investors accompanied by an increase in supply from short-term investors and trading volumes,” he said.
The report further highlighted that the ratio between the supply of long-term and short-term Bitcoin holders has reached levels not seen since July 2023, revealing a notable divergence between the idle supply and the supply in motion.
Glassnode also highlighted low investor activity, similar to the early 2019 and late 2020 periods that preceded major market uptrends. This pattern suggests the possibility of a continuation of the upward trend in the price of Bitcoin.
While investors with “older” coins are spending, steeper rallies indicate aggressive selling, while bearish periods indicate that holders prefer to keep their coins inactive.
However, investor confidence appears to be on the rise as both whales (holders of more than 1,000 BTC) and retail investors increase their holdings. This is evidenced by an increase in Bitcoin purchases, which has recently boosted the currency’s price.