Introduction: Historic Low in Bitcoin's Available Supply
As the much-anticipated fourth Bitcoin halving draws near, estimated to occur in just 157 days, a significant tightening in Bitcoin’s available supply is observed, reaching historic lows according to Glassnode's latest report.
Understanding Bitcoin’s Supply Dynamics
The report dissects Bitcoin's supply dynamics into three critical stages, each offering deep insights into the current state and behavior of the market.
1) The 'Available and Active' Supply Stage:
Short-Term Holder Supply: Currently at multi-year lows with 2.33 million BTC, representing the most liquid portion of Bitcoin's supply.
Recent Supply and Futures Open Interest: Includes coins less than a month old (1.39 million BTC) and the supply in derivative markets (0.41 million BTC), accounting for 5% to 10% of the active trading supply.
2) The 'Supply Storage and Saving' Phase
Decreased Available Supply: Indicative of coins moving away from exchanges and into cold storage or long-term wallets.
Accumulation Rates: Entities holding less than 100 BTC have been accumulating at rates surpassing new issuance since February 2022, marking a historic period of sustained accumulation.
3) Capital Flows and Market Valuation:
Realized Cap as a Proxy: Analysis using Realized Cap suggests tight supply and liquidity in the Bitcoin market.
Bitcoin Halving: A Strategy for Traders
The Bitcoin halving, occurring every 210,000 blocks to reduce new coin issuance by half, is a key event for traders. While the exact timing is uncertain due to the probabilistic nature of mining, history shows that trading actively around these events can yield substantial returns. According to trading veteran Plan B, returns during halving events could reach up to 2,500%.
Conclusion: Anticipating the Fourth Halving
With Bitcoin's available supply at an all-time low and a significant shift in market behavior, the upcoming fourth halving presents an interesting scenario for investors and traders. As the crypto community anticipates this event, understanding the dynamics of Bitcoin's supply will be crucial for making informed investment decisions.