Bitcoin: Why you need to be prepared for wild price swings

• A whopping 80% of BTC’s circulating supply was illiquid.
• The addresses holding at least 1,000 tokens ripped to a 1-month peak.

Once thought of as a high-risk high-return investment, the sentiment around Bitcoin [BTC] has undergone a profound transformation in the last year or so. As the dust settles from the bull market euphoria, investors, especially the seasoned ones, are realizing its long-term growth potential.

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According to a recent post by noted on-chain analyst James V. Straten on X, Bitcoin’s illiquid supply has been on a rapid climb over the last three months. So much so that it now constitutes a whopping 80% of the total BTC tokens in circulation.

Source: Glassnode

Low exchange volumes to lead to big moves?

As is well known, illquid supply is inaccessible for trading, rather locked up by entities in a cold wallet in anticipation of a long-term BTC price appreciation. This approach is frequently followed by long-term investors who have confidence in an asset’s fundamentals.

Since the parabolic moves in March, Bitcoin’s trading volumes on exchanges have declined progressively. With the exception of a few surges that followed brief periods of bullish and bearish behavior, daily volumes ranged from $10 billion to $15 billion. This was in sharp contrast to the intense trading activity witnessed in the last two years.

Source: Santiment

However, if analysts were to be believed, the volume drought could be a precursor to wild swings in prices in either direction. James V. Straten noted in his post further that,

“As the order book gets thinner, it makes explosive moves to the upside or downside more violent.”

The dull trading activity on exchanges was also attributed as one of the primary factors responsible for 17 August market crash.

Whales swim towards Bitcoin

Since the freefall earlier this month, Bitcoin has trended sideways, clinging to the $26,000 zone, according to data from CoinMarketCap. As the market stabilized to these levels, Bitcoin whales got back to their old ways.

According to a recent update by Glassnode, the addresses holding at least 1,000 tokens ripped to a 1-month peak.

#Bitcoin $BTC Number of Addresses Holding 1k+ Coins just reached a 1-month high of 2,020

View metric:https://t.co/cjV0krRVgK pic.twitter.com/BN1Bes168K

— glassnode alerts (@glassnodealerts) August 27, 2023

It should be recalled that a sizable chunk of whale investors contributed to the selling pressure during the market crash. In fact, these seasoned players had started to offload their bags in the days leading to the carnage.

However, now that Bitcoin has become rangebound, they began to add to their stockpiles. Additionally, it confirmed their belief that Bitcoin will soon head northward.

Apart from whales, individual investors also found a liking for the king coin. Addresses storing at least 1 BTC reached a fresh all-time high as per a recent post by Glassnode. The steady rise in retail investors’ demand for Bitcoin was a sign that the goals of widespread adoption, as envisaged by proponents, were on the right track.

Bitcoin’s dormant supply has also charged to new highs in 2023, reflecting the steadfastness of long-term investors. As shown below, most age bands exhibited the desire to hold BTC for extended periods.

In some ways, this tendency made Bitcoin resemble a long-term investment such as gold, mutual funds, and real estate.

Source: Glassnode

Traders remain hopeful

There’s an ancient proverb among technical analysts that goes, “The longer the base, the higher in space.” Simply put, it means the longer an asset consolidates sideways, the stronger the move when it finally begins.

A well-known Bitcoin trader recently pointed out that the ongoing bear market stretched for 490 days at the time of his post. Based on his analysis of historical price movements, the trader cum analyst forecasted a strong bull market in the coming days.

Needless to say, one should not forget that cryptos remained in the riskier assets category and it’s always important to DYOR.

490 Days of #Bitcoin Bear Market and still counting…

The Bull Market will be huge. pic.twitter.com/L2lxOfTWd7

— Mister Crypto (@misterrcrypto) August 26, 2023

How much are 1,10,100 BTCs worth today?

What to expect next?

Bitcoin’s recent crash was a reflection of the market’s insecurity that spot Bitcoin ETF approvals in the United States might not be immediate.

Going forward, the decision on BlackRock’s application and developments around Grayscale’s legal action against the U.S. Securities and Exchange Commission (SEC), could prove to be the big catalysts for Bitcoin’s price.