- Low transaction volumes fail to offer enough support for Bitcoin to stay above $50,000.
- The supply in Bitcoin’s long-term holders has reached an all-time high.
Last week, the world’s largest cryptocurrency Bitcoin (BTC) clocked staggering 14 percent gains moving past $50,000 levels over the weekend. On a monthly chart, BTC has rallied nearly 45 percent to hit this milestone.
While the Bitcoin (BTC) price is soaring recently, the on-chain transaction activity isn’t supporting the move. On-chain data provider Glassnode explains that the on-chain activity for Bitcoin remains divergent. Glassnode mentions:
Entity Adjusted transaction counts remain at historically low levels of between 175k and 200k transactions per day.
Transaction volumes are similarly depressed, with the Bitcoin network setting around $18.8B in daily volume. This is 37% lower than at the 2017 bubble peak, and a whopping 57.6% below the peak set during the May capitulation event
Over the last five years, there have been three such instances of low trading volumes. Following low transactions, the BTC price has been corrected so far.
On the other hand, the on-chain settlement has surged by 276 percent surpassing the $5 billion settlements happening throughout 2020.
On Monday, August 23, the Bitcoin (BTC) price took a dip under $50,000 levels. As of press time, Bitcoin (BTC) is trading 1.54 percent down at $49,556 with a market cap of $931 billion. Analysts have been suggesting caution at this point for making any fresh entry into Bitcoin. Speaking to CNBC, Bill Baruch, president of Blue Line Capital said:
I think it needs to be in your portfolio, but is $50,000 the place to be buying it? I wouldn’t chase it. Thus, I think it’s a great space to be in, but don’t chase it just because you see $50,000 in the headlines. Pick your spots and stick to your game plan.
Long term holders strongly holding BTC supply
One encouraging piece of data presented by Glassnode is the holdings of Bitcoin long-term holders (LTH). The supply from LTH corresponds to any coin unspent over the last 155 days. Thus, the Bitcoin holdings in the wallet of long-term holders have surged to an all-time high of 12.7 million BTC. This is a massive 67 percent of the total Bitcoin in circulation.
As we can see that heavy distribution by Long-term holders started last year around October 2020. However, we can see that the trend reversed in March 2021 with investors going for accumulation once again. It just took another 100 days for the Long-term holders to attain a new all-time high.
This recovery in the long-term Bitcoin supply goes to suggest Bitcoin investors are here for long. Bitcoin above $50,000 hasn’t seen sufficient trading volumes to continue the rally. As a result, we are seeing a partial pullback here. The immediate support levels for Bitcoin (BTC) on the downside are $48,00, $44,000, and $41,000.
