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The historical picture of this indicator of the Bitcoin network may indicate that the ongoing rally has not yet reached its peak.
Bitcoin’s annual dormant supply continues to rise lately
According to a report from network analytics firm CryptoQuant, the annual inactive supply peaked back in March of this year. 1 Year Inactive Supply is an indicator that measures the total percentage of Bitcoin supply that has not moved on the blockchain for at least a year.
This offer belongs to one of the two main groups in the BTC market: “long-term holders” (LTH). This group includes all investors who bought their coins more than six months ago, so the inactive supply metric for 1 year does not measure all of their supply, but only part of it (albeit a rather large one).
LTHs have a special place in the Bitcoin economy as they include the most determined investors in the market. Thus, the behavior of buyers and buyers of this cohort can have long-term consequences for the sector.
Here is a chart showing how BTC’s annual dormant supply has changed over the life of the cryptocurrency and how it seems to have taken its place in various price cycles:
It seems that the value of the metric has been growing in recent days | Source: CryptoQuant
As shown in the chart above, Bitcoin’s yearly dormant supply has historically tended to rise during bear markets. This means that these investors are typically hoarding ahead of and during a bear market.
LTH then continues to hold their filled bags and expand as it transitions into a bullish period. These investors exhibit this behavior throughout the bull market’s rally phase; when the rally reaches its final stage, these holders start selling to lock in their profits.
This pattern has been repeated throughout the different cycles, showing that the behavior of LTH hasn’t changed too much. However, one thing that differs between cycles is that their offer is growing overall. This can be partly explained by the fact that all bitcoin is lost due to the fact that the keys of the wallet become inaccessible.
The percentage of circulating supply owned by this segment of Bitcoin investors hit an all-time high back in March of this year, reaching north of 67%. Since then, these investors have lost a few coins, but the difference in their supply between then and now is negligible (13.1 million BTC versus 13 million BTC).
The April 2019 rally, similar to the current one, also showed that LTH held until the middle of the rally, when they started selling, with the cryptocurrency topping a bit later.
Assume that the price of bitcoin and the yearly dormant supply follow the same pattern in this current rally as they have in all of these past bull periods. In this case, it seems likely that the top has not been reached since LTH has not yet begun to participate in any significant distributions.
Bitcoin Price
At the time of writing, Bitcoin is trading around $28,300, down 4% from the last week.
BTC is obsolete in the last day | Source: BTCUSD on TradingView