The fourth Bitcoin halving is fast approaching and is estimated to be just 157 days away. In the meantime, there is a notable tightness occurring in the supply of Bitcoin that has now reached unprecedented levels in its history.
Glassnode’s latest report revealed that the ‘available supply’ is at historic lows, and rates of ‘supply storage’ surpass current issuance by a factor of up to 2.4x.
Tightness of Bitcoin Supply
The report talks about three pivotal stages, each providing valuable insights into the Bitcoin market. The initial one revolves around the ‘Available and Active’ Supply, which gauges the volume of actively circulating BTC available for trading.
Significant metrics in this category encompass Short-Term Holder Supply, which is currently at multi-year lows, standing at 2.33 million BTC. This cohort encompasses coins up to 155 days old, which statistically are the most likely to be spent.
Additional indicators of ‘hotter’ supply involve coins less than a month old (1.39 million BTC) and Futures Open Interest (0.41 million BTC), serving as a representation of ‘supply exposure’ in derivative markets. Collectively, this volume of ‘hot supply’ constitutes roughly 5% to 10% of the circulating supply actively involved in day-to-day trading.
Transitioning to the second stage, the measurement of rates of the ‘supply storage and saving’ phase revealed a decrease in available supply, indicating a noteworthy movement of coins away from exchanges and active trading, with a visible trend toward cold storage and long-term investor wallets.
The accumulation rates of all entities holding less than 100 BTC have exceeded new issuance since February 2022. This marked the longest and most sustained period in history.
The third stage zeroes in on analyzing the impact of capital flows on market valuation. Upon leveraging Realized Cap as a proxy to comprehend capital inflows, outflows, and the rotation of assets, it was found that Bitcoin supply and liquidity are fairly tight.
Bitcoin Halving Strategy
The halving stands out as one of the most anticipated events on the Bitcoin calendar. While it occurs every 210,000 blocks and slashes the rate of new coin issuance by 50%, the exact date and time are unknown due to the “natural variability and probabilistic nature of mining blocks.”
However, those who trade around these halving cycles potentially rake better returns than those who buy and hold. This was speculated by trading veteran Plan B, who recently noted that most Bitcoin price surges occurred in proximity to the three preceding halving events. According to his estimates, traders actively involved specifically during Bitcoin halving events might have experienced returns of up to 2,500%.
ALL bitcoin price increase occurred around the 3 halvings (H-6m / H+18m). Being in the market only in these 3 periods and out during the rest would have increased a $5 investment to $130k (purple line) instead of $37k buy&hold (blue line). NFA but fun to see what 4th halving… pic.twitter.com/TXQAszVZuz
— PlanB (@100trillionUSD) November 12, 2023