Bitcoin Supply Shock: Over Half of BTC Stays Dormant for 2+ Years, Creating Massive Supply Squeeze

Recent data, highlighted by Charles Edwards, founder of Capriole Investments, reveals a significant Bitcoin supply shock, with approximately 57% of BTC remaining dormant for over two years. This segment of the Long-Term Holders (LTHs) has set consecutive all-time highs in holding activity, indicating strong conviction among long-term investors.

Long-Term Holders (LTHs) and Stubborn Conviction:

• LTHs are investors who have held their coins for at least 155 days, showcasing a resilient stance in the market.
• The 2+ years segment represents a particularly steadfast group of HODLers, demonstrating an extended commitment to their BTC holdings.

Historical Trend and Current Status:

• A chart tracking the percentage of total circulating Bitcoin supply held by this segment of LTHs shows a consistent upward trajectory.
• Despite a slight recent slowdown in growth, around 57% of the total Bitcoin supply is now in the hands of these dedicated HODLers.
• Similar trends have been observed in the lead-up to previous bull runs, indicating a potential precursor to market movements.

Potential Impact and Supply Squeeze:

• Charles Edwards notes that the current scenario is creating a massive supply squeeze for Bitcoin.
• The recent approval of Bitcoin spot ETFs by the US SEC, which involves CASH subscriptions, could deepen the supply shock by taking more Bitcoin off the market with each purchase.

Additional Perspective from Chart Analyst:

• Chart analyst James V. Straten highlights a related angle by examining the percentage of Bitcoin supply stored on centralized exchanges.
• The data indicates a decline in the percentage of BTC stored on exchanges, reaching just 12%. This suggests a decrease in the effective trading supply of the asset as exchange supply is more likely to be involved in buying and selling activities.

Bitcoin Price Movement:

• Bitcoin is currently trading around $45,900, reflecting a more than 4% increase over the last week.
• The potential supply shock, coupled with positive price movement, underscores the complex dynamics influencing the cryptocurrency market.

Source: BTCUSD on TradingView

In conclusion, the sustained dormancy of a significant portion of Bitcoin supply, coupled with external factors like ETF approval, points to a potential supply shock. Investors are closely monitoring these trends, recognizing the potential implications for Bitcoin's price dynamics in the coming weeks.