Long-term Bitcoin holders at all-time high, but price not cooperating

Key Takeaways

Two-thirds of the Bitcoin supply has not moved in over a year
Metrics for percent of supply unmoved in 2+, 3+ and 5+ years also at all-time highs
The average hold period for Bitcoin on-chain is 3.8 years
Despite thesis that dwindling supply will boost price, this has not proved the case thus far

The capped supply of Bitcoin has always offered an intriguing layer to analysis of the enigmatic asset. 

Simply put, there are not many assets worldwide that offer an inelastic supply. Truthers argue that this cap will inevitably squeeze the price upwards through the simple economic theory of supply and demand. That is, assuming the demand continues to grow, of course. 

Here, we look at this supply, and how many of the total supply of 21 million bitcoins (of which 19.3 million are currently in circulation) have not moved in quite some time.

Percentage of Bitcoin supply unmoved in over a year at all-time high

If one takes the 1+ year mark as a benchmark for long-term holders, that means a growing amount of Bitcoin supply is held by what constitutes long-term investors. 

Two-thirds of the Bitcoin supply has not moved in over a year, an all-time high. That means no purchases or sales. 

In expanding the timeframe out, we can look at what portion of this 67% has been held for even greater amounts of time. On the below chart, I have plotted the portion of supply that has been stagnant for 1+ years, 2+ years, 3+ years and 5+ years. 

The results are interesting. Nearly half the supply – 49.3% – has not moved in over 2 years. Pushing out to 3+ years, the number is 39%. And 28.1% of the supply has not moved in 5+ years. The marks are all all-time highs.

So, diamond hands? Well, sort of. The numbers are certainly large, but there are other variables at play. Most notably lost coins, for which it is impossible to know how many there are. Satoshi Nakamoto is estimated to own over one million coins, which is circa. 5% of the supply alone. 

Long-term holders growing despite market carnage

Nonetheless, to see such stout numbers following the year that crypto has had is notable. The average hold time of Bitcoin on-chain right now is 3.8 years.

This comes less than a year after the collapse of LUNA (May-22) which sparked a meltdown crisis that ultimately bankrupted hedge fund Three Arrows Capital and sent a wave of contagion across the industry. 

Things shook further when this contagion claimed crypto lender Celsius in June. The fallen crypto lender disclosed two months before, at the Bitcoin 2022 conference, that it held 150,000 Bitcoin, which would constitute 0.8% of the supply. 

Unfortunately for investors, court filings by Kirkland & Ellis indicate that the firm has lost roughly 62,000 Bitcoin, and right now it is unclear how many they really held, nor how many the bankrupt firm now holds. 

Then there was the staggering collapse of FTX in November.

But despite this,  long-term holders do continue to grow, at least if on-chain metrics are to be trusted. 

Dwindling supply not supporting price

But as for the thesis that a dwindling supply will push price up, it has not worked to date. Bitcoin has collapsed while these metrics have all jumped to all-time highs. 

What happens in the long-term remains to be seen. The advocates aren’t wrong when they reference simple supply and demand. This will undoubtedly help the price, and if long-term holders continue to hold, the liquidity drying up further can only squeeze the price upward. 

On the other hand, every sale needs a bid order, and these have not been coming in quickly enough over the last two years. As I have written about repeatedly, Bitcoin continues to follow the macro cycle, trading like an extreme-risk asset making a mockery of those who claim it is any sort of inflation hedge. Look no further than its reaction to recent inflation readings and Federal Reserve meetings on interest rate policy for evidence of this. 

Undoubtedly the most important week for BTC this year. Not only are investors Fed-watching but they’re praying for expansionary policy & inflationary pressure⬆️

BTC & S&P500 correlation at all-time highs. Fed indirectly controlling BTC price

There’s an irony in there somewhere

— Dan Ashmore (@DanniiAshmore) February 1, 2023

Supply drying up is a good thing. But until Bitcoin sheds its high-risk image, it will continue to trade like a levered bet on the Nasdaq. Every asset needs a bid, people, and in times of uncertainty, the market has shown that Bitcoin is the last thing that investors want to hold. 

Time will tell if this all changes.