The battle to invest in Bitcoin is becoming difficult, as about 60% of BTCs in circulation (18.5 million BTCs) are held by business entities or individuals that have never sold more than 25% of BTCs they have been holding as long-term investments.
What you need to know: Only 21 million BTCs are ever going to be produced in total, and presently, there are about 18.5 million BTCs in circulation. This shows a differential of about 2.5 million BTCs that are left to be produced.
Chainalysis, a crypto analytic firm, wrote a report explaining how most BTCs are held by those who treat it as digital gold.
“This digital gold is supported by an active trading market for those who prefer to buy and sell frequently. The 3.5 million Bitcoin used for trading supplies the market, and, in interaction with the level of demand, determine the price.
“With more people looking to trade Bitcoin, which is only becoming scarcer following the recent halving.”
Chainalysis found that although retail traders are responsible for 96% of transactions, professionals move the bulk of the volume.
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“Retail traders, whom we categorize as those who deposit less than $10,000 USD worth of Bitcoin on exchanges at a time, appear to be the large majority, accounting for 96% of all transfers sent to exchanges on an average weekly basis.
“Professional traders, however, control the liquidity of the market, accounting for 85% of all the USD value of Bitcoin value sent to exchanges,” it added.
The report continued by stating:
“Bitcoin moving from the investment bucket (or potentially even the lost bucket if the earliest adopters still have their private keys) into the trading bucket could become a crucial source of liquidity.
“However, one would expect this will only happen if Bitcoin’s price rises to a level at which long-term investors are willing to sell.”