Four million. That’s about how much bitcoin is circulating freely right now, blockchain data shows. The number has become a little smaller for each month that has passed in the past year.
This is the assessment of Glassnode, an analysis company that tracks blockchain data. The pattern suggests that the ever-decreasing supply of bitcoin available to buy and sell may lead to a price increase as more institutional investors adopt the largest cryptocurrency as an investment.
Bitcoin’s ‘liquidity change’ – the amount by which the number of coins in circulation has changed over the past 30 days – has been negative for most of the past year, according to Glassnode:
It is a longer period in negative than historically, which potentially provides more support for bitcoin’s price strength in the long term despite short-term corrections such as last week’s 21% retreat.
As of Monday, there were only about 4 million BTC in constant circulation and available for purchase, trade and sale, according to Glassnode. The 30-day net change in BTC supply held by liquid and highly liquid entities has been in negative territory since April last year, except for a short period between July and August and again short in December.
“This has never happened before in such a long period of time and could lead to a massive delivery pressure soon,” Glassnode wrote on February 26 in its weekly newsletter.
Increased recognition of bitcoin’s long-term value
Bitcoin blockchain third halving last May, the rate of mining rewards dropped to 6.25 BTC for each block of data (approximately every 10 minutes) from 12.5 BTC. At the same time, big Wall Street companies like Goldman Sachs, Citigroup and BlackRock are now stupid in cryptocurrencies, while the payment giants PayPal and Square Cash App has allowed its users to buy and sell digital assets.
On Monday, Daniel Loeb, CEO and founder of the hedge fund Third Point, wrote in a series of tweets that he took a “deep dive into crypto. ”
Alessandro Andreotti, a non-prescription bitcoin broker, told CoinDesk that “institutions buy more bitcoin per month than those that are mined, and that’s not enough for everyone.”
“This is the biggest factor that has pushed up the price of bitcoin in recent times,” he added.
The supply dynamics may prove crucial in restoring a bullish tone to the bitcoin market, after last week’s price correction shook some investors’ confidence. The sale brought bitcoin to close to $ 43,000, a 26% drop from a full-time price above $ 58,000 on February 21st.
Compared to bitcoin’s latest major market correction in early January, fewer long-term bitcoin holders seemed to reduce their positions or make a profit last week, according to Glassnode. This can be seen in the diagram below, where the shaded red area – which indicates a lowering of the position of long-term holders – has moved back to a neutral foot.
Delivery pressure for institutions
Data from another blockchain analytics company, CryptoQuant, shows that more than 12,000 BTC, worth about $ 600 million, were moved out of the cryptocurrency exchange Coinbase Pro on Tuesday – seen as a probable withdrawal to cold storage for long-term holding by one or more institutional investors. This may be a sign that investors took advantage of the price decline to accumulate bitcoin at a discounted price.
Exchanges like Coinbase Pro are among the few preferred platforms for institutions to buy and sell bitcoin, according to John Willock, CEO of Blocktane for digital assets. This means that bitcoin’s already limited supply is only scarcer for these large bitcoin buyers.
“Coinbase will only touch coins through their exchanges, liquidity providers and networks of other partners that are brought to their liquidity pool by parties that can be fully controlled for the source of legitimate funds,” Willock said. “The bitcoin available on that platform can be considered ‘pure’ and has not recently been the revenue from markets for hacking, theft, ransomware or darknet.”
Fewer bitcoins will be available to institutions “because they have higher standards than the general market,” Willock said. “As a result, these types of institutions may be forced to start offering coins on these ‘pure’ exchanges, and that drives up the price overall.”