A leading digital assets manager says that the recent trend of Bitcoin (BTC) investors holding for the long term reveals two key insights.
In the latest Digital Asset Fund Flows Weekly report, CoinShares highlights how in contrast to previous Bitcoin four-year cycles where investors moved their BTC onto exchanges to take profits, the “class of 2017” sold less in 2021 than expected.
“In both the 2013 and 2017 bull periods, large positive net inflows have coincided with decreasing Bitcoin price levels (and decreasing average coin age), suggesting that many longtime Bitcoin owners took profits during the cyclical upturn.
Recently however, we see that while some investors indeed decided to move coins to exchanges and realize gains at the 2021 market peaks, the outflows from exchanges have far outweighed the inflows. This suggests a longer-term trend is in place.”
CoinShares also notes that nearly a quarter of Bitcoin supply remains dormant, and the next wave of demand from new investors could propel the king crypto up the price charts once again.
“The lack of inflows to exchanges since 2020 indicates that perhaps the 2017 class of Bitcoin investors are the most steadfast savers of any group initiated by the market-broadening halving events.
With 24% of circulating supply (or, 4.6 million BTC) now inactive, along with the trending decrease in exchange liquidity, investors may be encouraged that any event catalyzing significant new investor demand would likely accelerate the Bitcoin price.”
The data analytics firm says that the trend of long-term holding suggests Bitcoin may have matured from a speculative asset to one of wealth preservation.
“We believe what we’re observing is users increasingly using Bitcoin as a long-term savings tool, and less as a shorter term object of speculation.
It also suggests increased perceptions of system maturation and reduced perceptions of systemic risks among users who are seemingly increasingly comfortable with using Bitcoin as a longer term store of value.”
The firm does add one caveat by pointing out how the financialization of Bitcoin via mainstream investment vehicles means that people are now able to gain exposure to BTC without directly owning the asset.
“Prudent investors should however monitor changes to market structure that dilute the effects of any Bitcoin supply restrictions, such as increasing evidence of rehypothecation or the market’s exposure to synthetic Bitcoin products.”
At time of writing, Bitcoin is down a fraction and trading for $21,535.
Featured Image: Shutterstock/Ekaterina Glazkova
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