Market activity around Bitcoin (BTC) has increased following the approval of spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC).
A recent market report from Bitfinex shows a slight increase in the amount of BTC in circulation. Long-term investors are holding onto more assets, spurring Bitcoin price growth above $46,000.
In Bitfinex Alpha, this week we explain how Bitcoin miners have put pressure on the price of $BTC 📊
Miners are driven by surging prices and the need to raise capital to upgrade mining equipment ahead of Bitcoin’s halving.https://t.co/7ocyBJU9H5 pic.twitter.com/eqJiT4ssf4
— Bitfinex (@bitfinex) February 5, 2024
The report delved into “Supply Last Active” and other metrics used to show the circulating supply of Bitcoin between multi-year periods and how it impacts current price swings.
A significant factor in the slight increase in circulation is the approval of spot Bitcoin ETFs which have seen the dormant Bitcoin reintroduced to the market.
The months leading up to the approval date of January 11 were characterized by massive inflows into the market, with many analysts predicting a rise in prices.
Recent market activity has narrowed the gap between stored Bitcoin supply and active supply, steadily widening based on ETF-related factors. According to Bitfinex:
“This movement in Bitcoin’s old supply is an important indicator of market behavior, especially among long-term holders. It reflects the changing sentiment and strategies of these investors, who are most likely responding to market developments such as the introduction of Bitcoin ETFs or reevaluating their positions in light of current market conditions.”
Analysts point to Bitcoin’s days worth being destroyed due to supply shifts
The Value Days Destroyed (VDD) metric is used to predict when the price of Bitcoin has increased in bull cycles and is calculated by multiplying the asset price by the Coin Days Destroyed value.
There is currently an increase in VVD, which indicates that some investors are divesting their assets. Historically, VVD highs precede price peaks almost similar to bear market sell-offs.
However, the liveliness parameter remains at multi-year lows, showing that some holders will hold on to their assets for higher profit as the price collapsed immediately after Bitcoin’s spot approval.
“This suggests that a significant majority of Bitcoin supply continues to be held firmly. The reasons for this could vary: holders could be waiting for higher spot prices before deciding to sell, or they could be looking for greater market volatility as a catalyst for spend their coins.
The upcoming halving is another factor causing Bitcoin’s recent price movements.
Miners introducing their Bitcoin reserves to exchanges indicate an inclination to sell off leveraged assets to improve capacity and efficiency ahead of the halving.
