60% of Bitcoins haven’t moved for more than a year
In this lecture, I include links to, and commentary on, several third-party articles about cryptocurrencies. Learn my thought process and why I believe what I do about these digital assets. Often times, the media "spin" put on such articles is nothing more that a way to encourage you to part with your hard-earned money. I will teach you how to read into the details to determine the underlying truth. My comments and interpretations are embedded with the article and color-coded in brackets so you can understand my thoughts as your read into the article's details.
60% of Bitcoins haven’t moved for more than a year
Study finds that the number of Bitcoins HODLed for longer than a year has topped 10 million, marking a new high since early 2017 - what does that mean for the market?
January 11, 2020
With its drastic price swings over the last year, it may come as a surprise to learn that almost 60% of Bitcoins haven’t moved in the last 12 months.
According to findings by Digital Assets Data, a fintech company building cryptocurrency data feeds, as many as 10.7m Bitcoins have stayed put for more than a year. This amounts to 59% of the current supply of BTC (or approximately $84.5bn).
This indicates widespread HODLing of BTC, which could be an extremely bullish sign for the market.Rather than trading or transferring their Bitcoins, the majority of users are holding their digital assets, confident that higher prices are on the horizon. [I sincerely doubt that statement. Since the vast majority of BitCoin is controlled by less than 1000 wallets (which are probably represented by those "whales" diversifying into multiple wallets for security reasons as well as identity protection), and many of those wallets are held my the large mining community based mostly in China, I interpret that statements as saying the crypto whales are having a hard time finding more suckers to buy into this ponzi scheme.].
Founder of blockchain PR agency EAK Digital and organiser of Istanbul Blockchain Week Erhan Korhaliller enthuses: “The fact that 60% of Bitcoin hasn’t moved from wallets in a year is confirmation that Bitcoin is seen as digital gold.” [One of the hallmarks of GOLD is that it IS historical money that preserves purchasing power over time. See our gold education page at www.gold.thewealthcoaches.com for more insight and an example of how gold, expressed in terms of ounces used to purchase a car or a home in the 1960's, has maintained its purchasing power for decades. Unlike real gold, digital assets can be easily stolen, lost, hacked, diluted, fluctuate wildly, and could disappear in a flash with an exit strategy, 51% attack, or an EMP pulse from the sun that wipes out all digital records on the blockchain. Without a central authority to backup and verify one's holdings, buyers are left with no recourse for such losses. Crypto's are the absolute least secure form of "money" ever created, if they can even be called money with a straight face.]
Not only does this mark a major milestone for Bitcoins being held, but it also represents the highest percentage of BTC lying dormant for so long since the beginning of 2017. [Lying dormant is an indication that no one is really buying Bitcoin for real world digital use. It is mainly a game of shells played between whales and exchanges designed to give the illusion of real-world active use. Fact is, this game is running out of spectators.] Nicholas Pelecanos, advisor to NEM Ventures, comments:
“An increase in the number of dormant BTC wallets simply means less BTC holders are willing to sell their BTC. [Probably because few buyers are stepping up to the plate to buy digital tulips].
“This comes down to two core reasons: 1) The owner of the Bitcoin believes that the price will continue to appreciate and by holding now and selling later they stand a chance to make a profit. 2) The owner of the Bitcoin believes in the core principles that Bitcoin was built around and will hold onto their BTC because of their fundamental beliefs. [Many people held on for dear life after the Bernie MAdoff ponzi scheme too, waiting for a payout that never came!]
“In either scenario, this is bullish for the price of BTC as less supply on the markets will help create higher prices, particularly if public interest in the asset reaches late 2017 levels.” [Less supply or limited supply is always the industry's justification for higher prices. But economic theory states that an equilibrium price is determined where supply and demand meet. A rising price almost always means a lower demand for the product or service, all else being equal. Just because supply limitations drive up the cost of manufacturing, unless demand is created which offsets the normal inverse demand/price relationship, it does not follow that lower supply will ever lead to higher prices; quite the contrary for most assets. Diamonds and art may be notable exceptions because of the extreme uniqueness of each item creates a higher price which usually spurs demand. But, because no other new asset can be invented out of thin air to compete directly with these two asset classes, the inverse price/demand relationship can hold. Cryptos are NOT unique at all given the fact that hard forks and soft forks occur frequently, and new currencies are being created out of thin air every day. In fact, there are now over 5000 different crypto projects listed on CoinMarketCap.com. So, just because BitCoin has a limited 21 million supply, it doesn't mean its price can ever go parabolic again without some emotional hype that once again causes irrational exuberance as we saw in 2017 with the FOMO or fear of missing out syndrome. This can not be repeated under present realties. In fact, as price rises, buyers will shift to other projects looking for the next big gain. Unlimited choice is really a negative supply issue for ALL crypto projects.]
What else does this mean for the market?
The fact that so many investors are not considering selling BTC right now shows optimism in the asset’s future value. After all, there would be more Bitcoins changing hands if its holders believed that its value would go down. [Not necessarily true, In act, since most investors, if they still hold some BTC, will be willing to sell at or above their break even points just to get out there initial investments. Since most buyers bought between $10,000 and the all time high of $20,000+, as price rises, selling pressure will limit upward gains. And, if real demand isn't there, the whales and miners won't likely be buying as price rises but actually selling for the same or similar reasons, to take profits off the table.]
Korhaliller comments: “This also indicates that many of the weak hands left the market in 2018. This has left a large wall of HODLers that can provide an ever-higher ‘bottom’ Bitcoin price.” [All HODLers have a "get out" price, and many are still in the game. As other economic storms in the economy hit, BTC will be liquidated and NOT HODL'd as many expect. Risk-on assets like cryptos will be the first to go as liquidation fears emerge.]
Many BTC holders believe that its price will rise after the upcoming Bitcoin halving in May 2020. This four-yearly event that slashes block rewards for miners in half has historically had a positive impact on BTC price. [Again, it doesn't follow at all for the same reasons mentioned above. A higher manufacturing cost (aka mining) does not mean demand will automatically step up to meet the higher price. In fact, the inverse will happen without upward price manipulation by the miners who have a vested interest in wash-trading to artificially pump the price to draw in new money under FOMO. If that doesn't happen, which is what I predict, then miners will shut down, the cost of mining will later drop, and price will collapse back down to the new cost of mining until demand is met at the equilibrium price.]
The widespread amount of Bitcoins HODLed is in line with the fact that the Bitcoin hash rate is at an all-time high. This shows that miners are also confident in the growth of the network. [Not necessarily true either. Each miner is incentivized to work towards larger and larger mining centres in an attempt to gain control of the mining pool in order to gain a 51% position so they can dominate the blockchain verification process. Miners are literally running hot to try to put their competition out of business. As this requires selling their holdings whenever the price drops below their own breakeven cost, this will serve to dampen upward price pressure at all times, absent a coordinated action of mining pools to temporarily manipulate the price upwards.] And it also means that looking back at the price action of 2019, just 40% of all Bitcoins in existence participated in its swings.
Bitcoin has seen several major price swings over the last year. The world’s largest cryptocurrency began 2019 at a price of $3,693 and rose to a high of $13,879 in July, only to sink back as low as $7,280 by the end of December.
Euphoric unsustainable highs of the summer aside, BTC still managed to almost double its value in 2019 – even with 60% of its supply lying dormant. [And this was accomplished through massive price manipulation upwards to draw in new money. When 1000 players control over 90% of all crypto in existence, they can certainly push price in any direction they want as simply as turning a dial on their automated wash-trading programs.]
The Bitcoin community currently seems to be firmly comprised of HODLers rather than traders and speculators. [And these HODLers are largely whales and mining pools according to the published mining address lists. Again, there are no real buyers and speculators compared to the new money that we saw in 2017].
The fact that investors are holding indicates that they believe in Bitcoin’s long-term growth potential, and that can only be a good thing for the market. [The money help by the real investors excluding mining pools and exchanges is a paltry sum of the total supply. I believe the long-term growth potential is very negative from here because, if cryptos even survive coming legislative onslaughts and anti-money-laundering attacks, they will be destined to be marginalized stable coins with no prospect for wealth creation ever again. They will ultimately be used for internal project rewards and value-transfers across borders. But the days of massive speculative gains for doing nothing more than foolhardy risk taking of one's' assets, are gone.]