A leading digital asset manager says the recent trend for Bitcoin (BTC) investors to hold long-term reveals two key insights.
In the latest Weekly Digital Asset Funds Flow Report, CoinShares points out that, unlike Bitcoin’s previous four-year cycles where investors moved their BTC across exchanges to take profits, the “class of 2017” s sold less in 2021 than expected.
“During the bull runs of 2013 and 2017, large positive net inflows coincided with declining Bitcoin price levels (and a decreasing average coin age), suggesting that many owners of Bitcoin’s long-standing took profits during the cyclical rally.
However, recently we see that while some investors have indeed decided to transfer coins to exchanges and make gains during the market peaks of 2021, outflows from exchanges have greatly exceeded inflows. This suggests that a longer term trend is in place.
CoinShares also notes that nearly a quarter of Bitcoin’s supply remains idle, and the next wave of demand from new investors could push the king of crypto up the price charts again.
“The lack of influx to exchanges since 2020 indicates that the 2017 class of Bitcoin investors may be the most loyal savers of any group initiated by the market halving events.
With 24% of the circulating supply (or 4.6 million BTC) now dormant, as well as the trending decline in exchange liquidity, investors can be encouraged that any event catalyzing significant new investor demand would likely accelerate the price of Bitcoin.
The data analytics firm says the long-term holding trend suggests that Bitcoin may have shifted from a speculative asset to a wealth preservation asset.
“We think what we’re seeing is users increasingly using Bitcoin as a tool for long-term savings, and less for short-term speculation.
It also suggests an increased perception of system maturation and a reduced perception of systemic risk among users who are apparently increasingly comfortable with using Bitcoin as a longer-term store of value.
The company adds a caveat, highlighting how the financialization of Bitcoin through traditional investment vehicles means people can now gain exposure to BTC without directly owning the asset.
“Prudent investors should, however, watch for changes in market structure that dilute the effects of any bitcoin supply restrictions, such as increased rehypothecation evidence or market exposure to synthetic bitcoin products.”
At the time of writing, Bitcoin is down a fraction and trading for $21,535.
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Disclaimer: Opinions expressed on The Daily Hodl are not investment advice. Investors should do their due diligence before making high-risk investments in Bitcoin, cryptocurrency or digital assets. Please note that your transfers and transactions are at your own risk and any loss you may incur is your responsibility. The Daily Hodl does not recommend the buying or selling of cryptocurrencies or digital assets, nor is The Daily Hodl an investment adviser. Please note that The Daily Hodl engages in affiliate marketing.
Feature image: Shutterstock/Ekaterina Glazkova