More Investors Are Hoarding Bitcoin, as Money Held in Unsold Assets Grows

As Bitcoin heads into 2022, a growing cohort of long-term investors are doubling their cryptocurrency reserves, hoping a December drop was just a celebratory stunt.

Some industry watchers point to the underlying stability of these long-term investments as potentially promising indicators for the fickle cryptocurrency.

Underlying stability

Since last July, for example, the amount of Bitcoin held in digital wallets with no exits for more than five months has steadily increased, according to digital currency broker Genesis Trading.

Additionally, the amount of Bitcoin held in “illiquid” wallets – which spend less than a quarter of their inflows – is also increasing, meaning fewer coins are being actively traded, he added, citing wallet data. on several exchanges.

“The number of bitcoins that haven’t moved in over a year has increased since July,” said Noelle Acheson, head of market intelligence at Genesis Trading. “It’s pretty amazing.”

Many investors were nonetheless sent diving for cover in December when the world’s most popular cryptocurrency fell nearly 20%, much the same as the second-largest coin ether, with an appetite for the risk hit by inflation fears and a faster pace of interest rate hikes from the US Federal Reserve.

Since last July, for example, the amount of Bitcoin held in digital wallets with no exits for more than five months has steadily increased.

“Strong Hands”

While Bitcoin and Ether both posted gains last week — up 2.9% to $43,107 and 6.3% to $3,350, respectively — they are still some way off their 2021 highs. of $69,000 and $4,868.

Many cryptocurrency experts warn that no one is known to reliably predict Bitcoin’s characteristic price swings. In 2017, for example, it went from around $1,000 to around $20,000. At the start of 2020, it fell below $4,000 at one point before starting a dizzying rise.

Still, proponents of bitcoin and other coins say the growing acceptance of cryptocurrencies in mainstream financial and investment industries in recent years has bolstered the industry.

Cryptocurrency research firm Delphi Digital said its research showed a similar shift towards investors holding Bitcoin longer, which it says “illustrates a transfer of short-term ‘weak hands’ to long-term “strong hands”.

Crypto data platform Coinglass’ Bitcoin Fear & Greed Index has been hovering between 10 and 29 year-to-date, which could be an indicator of a possible market bottom and buying opportunities, according to Will Hamilton, head of trading and research at Trovio Capital Gestion.

“Previous market lows in July 2021 and March 2020 were correlated with fear and greed scores of 19 and 10 respectively,” he added. For the uninitiated, 0 indicates “extreme fear” and 100 “extreme greed”.

Musk and Doge

There were, meanwhile, more headlines for cryptocurrencies last week.

Meme-based Dogecoin stole the show after Tesla CEO Elon Musk tweeted that the company would accept it as payment for certain goods. The tweet sent Dogecoin up almost 12%.

“If more people are looking to buy Tesla merchandise with Dogecoin, there’s more demand,” Acheson said, adding that the move could improve fundamentals for Dogecoin.

Dogecoin

Meme-based Dogecoin stole the show after Tesla CEO Elon Musk tweeted that the company would accept it as payment for certain goods.

Another targeted altcoin was the Solana cryptocurrency, with analysts at Bank of America saying the Solana blockchain could take market share away from Ethereum and “could become the visa for the digital asset ecosystem.”

Elsewhere, bitcoin miners rebounded from the mining crackdown in China and recent unrest in Kazakhstan, one of the world’s major bitcoin mining hubs.

Bitcoin’s average “hash rate,” a measure of the power of the Bitcoin computer network, hit an all-time high of more than 215 million terahashes per second on Thursday, according to blockchain data provider Glassnode.

About Troy McMiller

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