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On-Chain Analysis: Bitcoin (BTC) Supply Crisis Is Coming

3 mins
Updated by Ryan Boltman
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In Brief

  • A Bitcoin supply crisis that will lead to a surge in the BTC price seems to be only a matter of time.
  • The old supply in the hands of long-term holders is at its highest level ever.
  • In recent months, there have been record BTC outflows from exchanges.
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In recent months, long-term holders have been accumulating BTC at a record pace. What’s more, the largest outflow of Bitcoin from exchanges in history is underway since the FTX crash in November 2022. There could soon be a major Bitcoin supply crisis on exchanges.

If this happens, it could be the catalyst for a surge in BTC prices. Therefore, January’s 40% increase in the price of the largest cryptocurrency may just signal the start of a new bull market. If long-term holders keep their assets, a Bitcoin supply crisis is only a matter of time.

In today’s analysis, BeInCrypto looks at several on-chain indicators that illustrate the current dynamics of the BTC market. Ongoing accumulation, the largest-ever BTC outflows from exchanges, record levels of old supply held by long-term holders, and historic accumulation going into 2019 are just some of the factors indicating an impending Bitcoin supply crisis.

Long-Term Holders at Historic Peak

Bitcoin long-term holders (LTHs) are defined as addresses that hold BTC for more than 155 days, or about 6 months. Short-term holders (STHs), on the other hand, keep their coins for less than 155 days and trade them more frequently.

Another way to distinguish between LTH and STH is the percentage difference between young and old BTC supply. Today, the blue chart shows almost 78% long-term holders, while the red chart shows 22% short-term holders.

It is clear that STH are at historical lows, while LTH are at historical peaks. In previous cycles, such a situation was correlated with a bottom in the Bitcoin price and signaled the start of a new long-term bull market.

Moreover, the percentage difference between old and young supply is currently the highest in history (ATH). When in previous cycles there were dramatic increases in the old supply chart. This signaled the start of a bull market (green circles).

Bitcoin: Percent Young vs Old Supply
Source: Twitter

In other words, 78% of the Bitcoin supply is sitting in the hands of investors who are not interested in short-term market gambles. They are willing to hold their coins on a long-term basis. Selling in this dominant cohort is only seen during strong increases in the BTC price.

Only 22% of the Bitcoin supply is traded short-term. Moreover, as the BTC price increases, so does the percentage of young supply, which is usually identified with retail investors who buy only during a clear uptrend.

The Bitcoin Supply Crisis on Exchanges Is Coming

If the trend on the STH and LTH charts continues, it could trigger a Bitcoin supply crisis and a lack of availability on exchanges. Moreover, the chart of the BTC balance on exchanges shows that there has been a steady outflow of Bitcoin since March 2020. Moreover, especially in October-December 2022, there was a dramatic decrease in BTC held on exchanges (green area).

Bitcoin Balance on Exchanges
Source: Glassnode

This latest period also saw the largest-ever outflow of BTC from exchanges. This is a clear signal of aggressive accumulation by whales and LTHs. Which took advantage of panic selling by retail and STHs, and the market’s FUD.

Bitcoin: Exchange Net Position Change
Source: Glassnode

BItcoin Is Increasingly Scarce, and Accumulation Continues

Another perspective that illustrates the dominance of long-term investors and signals a potential Bitcoin supply crisis is represented by the active supply chart. It captures the supply that was last active more than a year ago (blue) and less than a year ago (orange).

The disparity between the two groups is widening and has now reached a new all-time high. Despite the strong increase in the BTC price in the first weeks of 2023, there is still no selling pressure from the supply that has not been active for a year or more.

BTC Supply Graph
Source: Twitter

Finally, the Bitcoin accumulation chart is also approaching its 2015 ATH. Interestingly, we see a long-term increase in BTC accumulation. Which dates back to the end of the 2018-2019 bear market (green area).

Since then, investors have been steadily accumulating BTC. Only in 2021, during the previous bull market, this chart remained flat (orange area). Despite the BTC surge in 2023, Bitcoin accumulation is only accelerating. This trend means that a Bitcoin supply crisis remains only a matter of time.

Bitcoin accumulation Balance
Source: Twitter

For BeInCrypto’s latest crypto market analysis, click here.

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Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

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Jakub Dziadkowiec
PhD and an assistant professor at an international university in Lublin, Poland. Spent 10 years studying philosophy of nature and sport science. An author of 4 books and two dozens of scientific articles. Now, he is using his mind for the benefits of the cryptocommunity. Technical analysis enthusiast, Bitcoin warrior, and a strong supporter of the idea of decentralization. Duc in altum!
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