Bitcoin supply could struggle to meet demand as miners ‘hodl’
Bitcoin’s long-term value predictions are driving miners to hold on to their assets rather than sell them, according to recent data.
As more institutions and private investors jump on the rise of cryptocurrencies, many of the miners who excavate them are also seeing greater value in keeping hold of the Bitcoins they create rather than quickly moving them on.
This practice, some analysts fear, could have a serious knock-on effect in the supply of Bitcoin (BTC) and may force the price to remain temporarily static for a period rather than break through new all-time high ceilings predicted by many of the industry’s leading figures any time soon.
Only last week, Kraken CEO Jesse Powell suggested one BTC would be worth the same as a Lamborghini this year, then a Bugatti in 2022. Bookmakers too were confident that Bitcoin would breach $100,000.
However, if some predictions over the change in sentiment from miners are to be believed, the supercars may be out of reach until the supply questions are addressed.
According to data centre Glassnode, a little more than a third of Bitcoin’s supply has changed hands since November 2020, as long-term ‘hodlers’ (the expression ‘hodl’ came about by accident through a drunken spelling mistake in a tweet several years ago – it has since been adopted in the crypto community as the standard term for holding on to investments) doubled down on their savings.
The pattern mirrors a similar situation in 2017 when miners anticipated an imminent price rise and began to stack the coins rather then move offer them to buyers.
Glassnode’s data also highlights that miners have recently accumulated almost 9,000 Bitcoins worth around $514 million.
This activity could be one of the main factors in Bitcoin’s current inability to return above the $60,000 level it successfully broke last month as it ticked off an all-time high of $62,701.
The issue is compounded by the overwhelming demand for Bitcoin from institutions which, although driving the current crypto surge, could also end up choking the supply. Huge players like Morgan Stanley, Tesla, the Bank of Japan, Aker and Goldman Sachs are leading the charge, but there is now serious concern about the fragility of the dynamics as demand outweighs delivery.
Glassnode’s data study has now clearly permeated the market. Having threatened to challenge $60,000 two days ago, Bitcoin dropped heavily by almost $3,000 yesterday as it caught support around $56,900 before a return above $58,000.
Today, it struggled to hold $58k. Instead, a gradual downward staircase landed it back at $56,900 where some buying volume has resumed to grip on to $57,400.
Elsewhere, Ethereum continues to impress above the $2,000 line after repeatedly notching all-time highs on Friday. Polkadot’s native DOT was also building on its recent success while Ripple’s XRP carries on a remarkable upward movement which has left many observers baffled.