The Bitcoin Rally May Not Have Peaked Yet, Here’s Why
The historical pattern in this Bitcoin on-chain indicator may indicate that the ongoing rally has not yet peaked.
Bitcoin 1-year idle supply has continued to increase recently
According to a post by research firm CryptoQuant on the chain, the 1-year idle supply hit a high in March of this year. “1-year inactive supply” is an indicator that measures the total percentage of Bitcoin supply that has not moved on the blockchain since at least one year ago.
This supply belongs to one of the two major cohorts in the BTC market: “long-term holders” (LTHs). This group includes all investors who bought their coins more than six months ago, so the 1-year idle supply measurement does not measure their entire supply, only a segment of it (although it is quite large).
The LTHs have a special place in the Bitcoin economy as they constitute the most resolute investors in the market. The selling and buying behavior of this cohort may therefore have long-term implications for the sector.
Here’s a chart showing how the 1-year idle BTC supply has changed over the lifetime of the cryptocurrency and how it’s seemingly taken its place in the various price cycles:
Looks like the value of the metric has been on the rise in recent days | Source: CryptoQuant
As the graph above shows, Bitcoin 1-year idle supply has historically increased during bear markets. This means that these investors typically participate in accumulation in the run-up to and during bear markets.
The LTHs then continue to hold their filled bags and widen as they head towards a bullish period. These investors exhibit this behavior throughout the build-up phase of the bull market; as the rally begins to reach its final stages, these holders begin selling to take their profits.
This pattern has repeated itself throughout the different cycles, showing that the LTH’s behavior has not changed too much. One thing that does differ between the cycles, however, is that their supply has gone up overall. This will be attributed in part to all the Bitcoin that has been lost due to wallet keys becoming unavailable.
The percentage of the circulating supply held by this segment of Bitcoin investors reached an all-time high in March of this year, reaching a value north of 67%. These investors have dumped some coins since then, but the difference in their supply between then and now is negligible (13.1 million BTC vs 13 million BTC).
The April 2019 rally, similar to the current one, also saw the LTHs hold tight until mid-way through the rally, when they began selling, with the cryptocurrency peaking only a short while later.
Assume Bitcoin price and 1-year idle supply will follow the same pattern in this current rally as in all these recent bullish periods. If so, it seems likely that the top has not been hit since the LTHs have not yet begun to participate in any significant distribution.
BTC price
At the time of writing, Bitcoin is trading around $28,300, down 4% in the last week.
BTC has gone stale in the past day | Source: BTCUSD on TradingView
Featured Image by Kanchanara at Unsplash.com, Charts by TradingView.com, CryptoQuant.com
