- According to a report by Chainalysis, only a meager 19% of the Bitcoin supply is used for trading purposes.
- More than 60% is held for the long term because people think that it is no less than gold.
60% Of The Mined Bitcoin Is Treated As Digital Gold
Only 18.6 million Bitcoin mined this month as per the report. On basis of the usage the 18.6 million bitcoin can be divided into three parts:
- The amount of Bitcoin held by entities such as people, government organisations, businesses is roughly 60%. They have only sold a maximum of 25% of the Bitcoin they received and held the bitcoin for a very long period. Chainalysis termed these as ‘Bitcoin held for long time investment’.
- Another 20% of Bitcoin, has seen any activity in the past few years and are considered as ‘Lost Bitcoin’.
- The remaining 19% of the bitcoin is thoroughly transferred in exchanges and primarily used for transactions and are often termed as ‘Bitcoin used for trading’.
It is quite clear from the data that, majority of the Bitcoin share is owned by the people who prefer to hold them for a long period. In other words, they treat bitcoin as digital gold. However, the concept of digital gold is encouraged mainly by those who prefer to sell and buy more frequently in the active trading market.
The amount of Bitcoin used for trading actually determines the demand and price of it in the market. However we cannot ignore that the supply of Bitcoin has decreased due to its third halving this year. Which means people who invested Bitcoin could possibly use it for trade.
This could possibly become a crucial point for liquidity. Nevertheless, this could only happen when the price of Bitcoin rises to a very high level and the investors would change their mind and then actually use it for trading purposes.
Although Retails Traders Are In Majority, Professionals Control The Market
Tens of millions of people hold Bitcoin and over 5 million visit exchange websites each week. However, the truth is that only a maximum of 340,000 traders of Bitcoin is active on a weekly basis. Chainalysis has again divided the users on the basis of the US Dollar transactions occur on the exchanges every day:
- Retail: they deposit less than 10000 US Dollar worth bitcoin, per transaction. They are in majority and 96% of the weekly transfers are due to them.
- Professional: they are main contributors of the Bitcoin market and contribute to the liquidity of the market. 85% of all US Dollar worth Bitcoin value is sent to the exchanges by them.
However, exchanges as the main hub of cryptocurrency transactions and the storage of Bitcoin, have shown its dominance as the Virtual Assets Service Providers (VASPs).