The historical pattern in this Bitcoin on-chain indicator may indicate that the ongoing rally has not yet peaked.
Bitcoin 1 year idle supply has continued to rise lately
According to a post from the on-chain analytics company CryptoQuant, the 1-year idle supply peaked in March this year. The “1 Year Inactive Stock” is an indicator that measures the total percentage of Bitcoin stock that has not moved on the blockchain since at least a year ago.
This offering belongs to one of the two main cohorts in the BTC market: the “long-term holders” (LTHs). This group includes all investors who bought their coins more than six months ago, so the 1-year idle stock does not measure all of their stock, just a portion of it (albeit a fairly large one).
The LTHs hold a special place in the Bitcoin economy as they are the most determined investors in the market. Thus, the selling and buying behavior of this cohort may have long-term implications for the industry.
Here’s a chart showing how the 1-year idle BTC supply has changed over the lifetime of the cryptocurrency and how it’s seemingly taken its place in the various price cycles:
Looks like the value of the metric has been on the rise in recent days | Source: CryptoQuant
As the chart above shows, Bitcoin’s 1-year idle supply has historically risen during bear markets. This means that these investors generally participate in accumulation leading up to and during bear markets.
The LTHs then continue to hold their filled pockets and expand as they transition into a bullish period. These investors exhibit this behavior during the build-up phase of the bull market; when the rally starts to reach its final stages, these holders start selling to take their profit.
This pattern repeated itself over the different cycles, showing that the behavior of the LTHs has not changed too much. However, one thing that differs between cycles is that their supply has generally increased. This would be partially attributed to all the Bitcoin lost due to wallet keys becoming inaccessible.
The percentage of the circulating supply held by this Bitcoin investor segment reached an all-time high in March this year, reaching a value north of 67%. These investors have since lost some coins, but the difference in their stocks between then and now is negligible (13.1 million BTC vs. 13 million BTC).
During the April 2019 rally similar to the current one, LTHs also held their own until midway through the rally, when they started selling off, and the cryptocurrency topped out moments later.
Suppose that the Bitcoin price and 1-year idle supply in this current rally will follow the same pattern as during all these bullish periods in the past. In that case, it seems likely that the top has not been reached, as the LTHs have not yet begun to participate in any significant distribution.
BTC price
At the time of writing, Bitcoin is trading around $28,300, down 4% over the past week.
BTC has gone stale in the past day | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com
