Quite promising to Bitcoin enthusiasts, this week ended with more than 97% of BTC addresses in the money. The latest report by IntoTheBlock revealed that this was an astounding figure, pointing out that a significant number of Bitcoin holders are economically better off.
To determine whether an address is “In the Money” or “Out of the Money,” IntoTheBlock compares the average purchase price for tokens held by any address with their current market value. In other words, they verify if today’s price exceeds yesterday’s average cost for purchasing these coins. If it does, then such an account is “In the Money.” Otherwise, if today’s price per coin drops below what one paid when acquiring them before, then this account is “Out of the Money.”
This profitability increase is a major development similar to November 2021, which saw BTC prices almost reach an all-time high of $69,000. Over 97% of addresses being profitable has led to a decline in selling pressure from those trying to recover their cost. In other words, new market participants purchase coins from existing users who have already generated some profit.
Let us take a closer look at the market dynamics depicted by long-term BTC holders. These hodlers own 13.6 million BTC, which they have held for over a year, demonstrating that they are long-term investors. Hodlers seem to have an instinct for timing market cycles skillfully, buying when prices touch the bottom and selling near the cycle’s peaks.
Recent data on January 16 showed an average holding period for sales exceeding one year, reaching its highest level since February 1, 2022. Another interesting case was on February 19th which again emphasized how resilient long time holders are even during volatile market times.
Anticipating The Bitcoin Halving
The upcoming Bitcoin halving scheduled for April 19th, 2024, is something to watch closely. This will see the number of new bitcoins given to miners as a reward being reduced by half, affecting the 900 or so bitcoins distributed daily worldwide.
Miners presently get rewarded with 6.25 freshly minted Bitcoins per block mined. This, however, will be reduced to 3.125 BTC once the halving takes place. This way, halving events lowers the speed at which new Bitcoin gets made, eventually cutting out inflation. The scarcity of Bitcoin and increased demand has always been associated with its economic principles and therefore its value could potentially increase significantly.
Halving events like this interact with market dynamics like those around long-term holders and continue altering Bitcoin’s price trajectory. Decreased supply versus increased demand may lead to appreciation of the value of Bitcoin hence giving investors an insight into navigating through ever changing world of cryptocurrencies.