There’s no denying the crypto market has been extremely bearish over the past 7 months, with Bitcoin, the world’s largest cryptocurrency by total market capitalization, recording just $14 million in inflows year-to-date. now (YTD) according to Coinshares.
Furthermore, the illiquid supply ratio of the leading cryptocurrency – i.e. the number of Bitcoins that are moved out of exchanges and into hardware “cold storage” or “hot” wallets on applications increases. from the beginning of 2022.
Specifically, there are currently more than 14.8 million illiquid BTC and this number increased quite strongly (about 500k) in just the first half of the year. This is largely due to a variety of macroeconomic factors surrounding the global economy (such as Russia’s recent invasion of Ukraine, increased cryptocurrency liquidation, escalating inflation, and rising inflation). interest rate).
It should also be noted that the total amount of BTC in circulation currently stands at around 19 million, with around 900 coins being mined and added to the total supply each day.
Collectively, an estimated 76% of BTC’s total supply is currently classified as illiquid. This level is quite staggering given that more than 90% of all Bitcoins that could exist have been mined.
The increased illiquid supply is also reflected in related indicators such as changes in Bitcoin’s illiquid supply. This index reflects the monthly (30-day) net change in the supply of digital currency held by illiquid entities. This is important because recent macro events surrounding the market – such as major market players such as Three Arrows Capital, Celsius, Vauld and Zipmex defaulting – have made users understand the importance of this. of the right of custody.
The chart below clearly shows the trend of investors moving Bitcoin to external wallets, especially after the aforementioned capitulations in June.
Bitcoin’s illiquid supply has been steadily accumulating for over 6 months now and was interrupted only last month. However, as can be seen above, the trend is up again, stronger than ever. These sudden spikes could negatively impact Bitcoin’s supply dynamics, leading the price to face a lot of volatility in the near to medium term. Therefore, nothing can be said about the future of Bitcoin at the moment.
Bitcoin Still Not Out Of Danger According To A Whale Related Index
Bitcoin could go further south, at least according to the Whale Transaction Rate.
Despite trading 25% above the multi-year low at $17,500 set in June, CryptoQuant suggests BTC could face an upcoming drop. This is because the Whale Trading Rate starts to overheat.
This metric shows the relative size of the top 10 inflow trades relative to the total inflow across exchanges. In bull markets as the backdrop through the end of 2021, the ratio is typically below 85%.
However, the odds are often higher when bears take control of the market or in what CryptoQuant describes as a “fake bull market for mass dumps.”
The latest report on the matter by the source of the analysis noted the Whale Trading Rate jumped above 0.925, setting a multi-year high. The last time this high was recorded was in early 2020, just before Bitcoin cooled down and plunged below $4,000 during the COVID-19 crisis.
Since then, the metric has mostly remained below or around 0.85, coinciding with the massive rally that saw BTC hit an all-time high of $69,000 last November.
The index spiked above 0.85 in the second quarter of 2022. This turned out to be the leading cryptocurrency’s worst quarter in a decade. As it is currently still in this danger zone, CryptoQuant concludes that BTC will likely continue to retrace as “there is no clear sign of cooling down.”
Bitcoin Price Update
As mentioned above, BTC peaked in November 2021 but has been in free fall ever since. The situation worsened in June of this year when the price slid from over $30,000 to its lowest position since December 2020 of $17,500 in just a few days.
A few weeks later it was more of a relief when it regained its coveted $20,000. Last week saw another rally to a 40-day high of more than $24,000.
However, the price failed to continue upward and dropped $2,000 upon news that Elon Musk’s Tesla sold 85% of its BTC holdings in Q2. Currently, it is still trading at around $22,000, but it will be interesting to see if there is another slide as the Whale Trading Rate suggests.