Key Takeaways
- Bitcoin’s price has reached $42,000, a new all-time high.
- Bitcoin is currently at the 2019 top concerning its “dormancy ratio,” as old hands move BTC to book profits.
- The cryptocurrency is facing a supply crunch as long-term hodlers wait patiently for higher prices.
Bitcoin’s price has reached a new all-time high of $42,000. The unprecedented rise is backed by strong holders and new buyers, but the market is starting to witness bull exhaustion.
Bitcoin Price Is Ruled by Supply
The supply of Bitcoin has been constrained strongly since the COVID-19-related market crash in March 2020.
According to research from Glassnode, “78% of the circulating Bitcoin supply is considered illiquid.” The firm’s analysts say that this means that investors are holding onto their Bitcoin tightly, and that low liquidity could create a “supply-side crisis.”
Elsewhere, Philip Gradwell, the Chief Economist at Chainalysis has stated that Bitcoin is above $41,000 because “new investors keep buying but now have to buy from long term investors, who need high prices to sell.” He adds that the supply curve is “now very steep.”
As a result of these trends, the Bitcoin network is now starting to witness profit-booking from old wallets.
Coin Days Destroyed Is High
A metric called coin days destroyed (CDD) measures the movement of Bitcoin based on the time it was last moved from an address. The total CDD rises when old hands move their Bitcoin on-chain.
According to Glassnode, the weekly average Bitcoin CDD has been on the rise since October.
The 2017 bull market maintained a high CDD before the market reached its peak in December. Since mid-November, old investors have sold $1 million BTC to new investors, according to Gradwell.
Nevertheless, the volume of coins moved on-chain has also increased considerably, projecting strong liquidity of the market.
Dormancy Flow Is Lower
The comparatively low dormancy flow, which measures the ratio between CDD and on-chain volume, is proof that sellers still haven’t reached 2017 levels concerning on-chain volume.
The ratio, however, has reached the 2019 top, suggesting that the bulls face a lot of resistance at this point. Between Q4 2020 and today, Bitcoin has seen inflow from outside of the crypto world, suggested by the limited stablecoin inflow to exchanges.
Hence, as Bitcoin continues to gain traction from new entrants, the high expectations of the illiquid supply of the market, probably in the $50-100k region, is pushing prices higher.
At the time of writing the author held BTC and less than $15 of altcoins.
Shutterstock cover photo by WhiteBarbie
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
Source: Read Full Article