Bitcoin Investors Should Be Prepared for Violent Price Fluctuations!

• The illiquid supply of Bitcoin has rapidly increased in the past three months. In fact, it currently accounts for 80% of the total circulating BTC tokens.
• Since the parabolic movements in March, the trading volume of Bitcoin on exchanges has consistently decreased. Following short-term increases in bull and bear behaviors, daily volumes have ranged between $10 billion and $15 billion.
• After the drop earlier this month, Bitcoin tightly held onto the $26,000 region. When the market stabilized at these levels, Bitcoin whales returned to their old habits.

Bitcoin price has been moving in narrow price ranges since the crash on August 17; A major volatility explosion may be imminent!

Decrease in Bitcoin Supply on Exchanges

The sentiment around Bitcoin, once seen as a high-risk, high-reward investment, has undergone a deep transformation in the past year. In this period when the excitement of the bull market has subsided, especially experienced investors are starting to recognize the long-term growth potential.

According to the recent article by renowned on-chain analyst James V. Straten on the X platform, the illiquid supply of Bitcoin has rapidly increased in the past three months. In fact, it currently accounts for 80% of the total circulating BTC tokens.

As known, illiquid supply remains inaccessible for trading and instead stays locked in cold wallets with the expectation that the asset’s fundamental value will increase in the long term. This approach is generally followed by long-term investors who trust the fundamentals of the asset.

Since the parabolic movements in March, the trading volume of Bitcoin on exchanges has consistently decreased. Following short-term increases in bull and bear behaviors, daily volumes have ranged between $10 billion and $15 billion. This was a sharp contrast to the intense trading activity seen in the past two years.

However, according to analysts, the volume drought could be a precursor to wild fluctuations in both directions. James V. Straten stated the following in his article:

“As the order book thins, upward or downward explosions become more intense.”

Boring trading activity on exchanges was also considered one of the fundamental factors responsible for the market crash on August 17.

Whales Flocking to Bitcoin

After the drop earlier this month, Bitcoin tightly held onto the $26,000 region. When the market stabilized at these levels, Bitcoin whales returned to their old habits. According to a recent update by Glassnode, addresses holding at least 1,000 tokens reached a monthly peak.

It should be noted that a significant portion of whale investors contributed to the selling pressure during the market crash. In fact, these experienced players had started disposing of their assets in the days leading up to the disaster. But now, as Bitcoin is in the range context, they have started increasing their holdings.

Individual investors have also shown love for Bitcoin alongside whales. According to a recent post by Glassnode, addresses holding at least 1 BTC reached a fresh all-time high. The steady increase in Bitcoin demand from retail investors was a sign that the widely anticipated goals of widespread adoption were on the right track.

In 2023, Bitcoin’s stagnant supply also reached new highs, reflecting the determination of long-term investors. As shown in the chart below, most age groups demonstrated a willingness to hold BTC for the long term. In a way, this trend positioned Bitcoin as a long-term investment similar to gold, investment funds, and real estate.

Traders Continue to Remain Hopeful

There is a common saying among technical analysts: “The longer the bottom, the higher the peak.” Simply put, when an asset consolidates horizontally, the subsequent movement becomes stronger.

A well-known Bitcoin trader recently stated in a comment that the bear market lasted for 490 days during his writing. Based on the analysis of historical price movements, the analyst predicted a strong bull market in the near future.

Of course, it should be remembered that cryptocurrencies still fall into the category of risky assets, and it is always important to do your own research (DYOR).

What to Expect?

The recent crash of Bitcoin was a reflection of market uncertainty that spot Bitcoin ETF approvals in the United States may not be immediate.

In the coming days, developments surrounding the decision on BlackRock’s application and the lawsuit filed by Grayscale against the U.S. Securities and Exchange Commission (SEC) could be major catalysts for Bitcoin’s price.