As the highly anticipated Bitcoin halving approaches in early 2024 and optimism grows around a spot ETF approval in the US, the excitement and positivity surrounding Bitcoin continues to build. In this context, a crucial question for investors is: what portion of the 21 million Bitcoin supply is actively circulating versus held tightly in reserves?
According to on-chain data analytics firm Glassnode, the BTC supply is historically tight, with a growing proportion held in inactive wallets. This suggests that despite strong price gains this year, long-term Bitcoin investors remain committed to holding their coins.
- Over 68% of the Bitcoin supply has not moved in over 1 year, an all-time high per Glassnode data.
- Nearly 42% of the supply has been dormant for over 3 years, a record level.
- Long-term holders continue accumulating with minimal intention to sell.
- Short-term holders have recently taken some profits, but supply remains tight.
- Current prices are approaching key levels where new supply could be unlocked.
Bitcoin’s price rise this year has been impressive, but according to Glassnode’s data, long-term investors still seem unwilling to part with their coins. Metrics tracking the Bitcoin supply by age show record levels of dormant coins:
- “68.8% of supply last active 1+ years ago” per Glassnode
- “57.1% of supply last active 2+ years ago”
- “41.1% of supply last active 3+ years ago”
- “29.6% of supply last active 5+ years ago”
The metric tracking “Illiquid Supply”, which measures coins held in wallets with little spending activity, is also at an all-time high of 15.4 million BTC, according to Glassnode. Much of this is driven by continuous withdrawals from exchanges into private cold storage or custody wallets, with over 1.7 million BTC withdrawn since May 2021.
Divergence between long and short-term holders
The maturing supply is reflected in the growing divergence between Long-Term Holder (LTH) and Short-Term Holder (STH) supply according to Glassnode:
- LTH supply nearing all-time highs
- STH supply at effectively all-time lows
Long-term holders (LTHs) are defined as wallets that have held coins for over 155 days, while short-term holders (STHs) have held coins for less than 155 days. This divergence demonstrates that existing long-term holders are becoming extremely unwilling to part with their holdings. They are continuing to accumulate while tightening their grip on the circulating supply.
If these LTH trends continue in the lead up to the halving in April 2024, overall supply tightness could increase dramatically, according to Glassnode. However, some metrics show short-term holders recently taking profits around $35k. As prices approach former all-time highs in the $60k to $69k range, more supply could potentially unlock.
Clusters of Bitcoin Cost Basis
Analyzing the cost basis of the Bitcoin supply provides insight into key potential support levels. Glassnode identifies clusters of supply around:
- $26k-31k: Large amount of supply accumulated in Q2/Q3 2022
- $33k-35k: Significant supply transacted around current prices
- $35k-40k: Supply from 2021 bull market above current prices
This suggests the $30k–31k range is an important potential support level, with minimal activity and volume transacting between $31k and $33k, according to Glassnode.
Halving Approaching Amidst Tight Conditions
Overall, Glassnode’s on-chain data shows the Bitcoin market is currently one of the tightest supply environments ever observed. This could persist or even accelerate into the halving in 2024. However, supply dynamics could also change rapidly if long-term holders begin distributing coins.
With the halving approaching, investors should watch on-chain metrics closely for signs of supply dynamics shifting, according to Glassnode. The current data suggests the market is coiling ever tighter ahead of the next major price move.