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Digital asset prices were mostly steady throughout the past week, as the largest cryptocurrency by market cap, Bitcoin (BTC), was trading near $51,000 per unit on Friday morning. This was just about -1.5% lower than during the same time a week ago. Still, a near 20.0% gain throughout February has put BTC on track for a sixth consecutive monthly gain, a level of consistency that has not been achieved since early 2021. In fact, it would be tied for the longest ever string of green months in Bitcoin’s history, going back to 2011.

This near-record run might suggest BTC prices are due for a pullback after half a year of nonstop momentum, but the on-chain data continues to flash some of the hallmarks of a sustained bull market. First, the balance of Bitcoin held on more than 30 exchanges tracked by Glassnode appears to be making another leg down, slipping to an almost six-year low on February 22 at 2.314 million BTC (equivalent to about $118.0 billion). As a percentage of Bitcoin's total circulating supply, that sum represents just under 11.8%, the lowest share held on exchanges since December 2017. Though 2.9 million new BTC have been mined between then and now, roughly 85.0% of it has accrued to privately-held wallets owned by institutions or individuals. When supplies are held off-exchange, they less likely to be sold into the market.

That split helps us understand how a record 70.8% of all Bitcoin had remained untransacted for at least a year by last November. After each boom in the price of Bitcoin, a so-called "bust" period tends to take place sequentially. During the bust, when the price of Bitcoin declines, long-term adopters continue to accumulate scarce BTC while traders sell. Traders or anyone else seeking to make short-term gains tend to make up a minority of Bitcoin investors. Each boom in demand mints a new class of long-term adopters and the bust allows this increasingly large cohort to accumulate more than they could have during the boom due to suppressed prices. When prices begin rising again, usually induced by shifting economic conditions and monetary policy decisions that tend to drive assets toward commodity assets like gold and Bitcoin, the most aggressive portion of a boom can often be confirmed by a material decline in the supply of BTC left untransacted for a year or more. If a Bitcoin remains in place and is not transferred to any other address, that means it is not being sent to an exchange for selling.

Chart provided by MacroMicro.me

Between September 2020 and November 2021, for instance, Bitcoin’s unit price surged from around $10,300 to an all-time high of nearly $69,000. Throughout that same period, the portion of BTC’s supply that had been idle for a year or more slumped from 63.5% to 54.5%. This decline signals a shift from accumulation to distribution among long-term adopters, as the appreciation of Bitcoin prices has become so rapid (a function of demand heavily outweighing available supply) that it can even shake loose some of the coins held so tightly by the most faithful long-term adopters who now want to take some profit by selling to new entrants drawn by speculation. Historically, the BTC accumulation that takes place when prices are subdued results in a smaller share of supply available on the market for the latest new entrants, compared to what was available at the beginning of the previous boom period, helping prices eventually push toward new all-time highs.

Back in March 2023, MRP noted that we were yet to see this cycle-defining feature appear in the on-chain data, suggesting a full-on bull market in Bitcoin and crypto markets was yet to be confirmed or that it was in very early stages with supply remaining relatively illiquid. By late August, however, it appeared that the accumulation among long-term adopters was beginning to peak, coinciding with the launch of our LONG Bitcoin Theme. We closed that Theme on December 20, 2023 after the ProShares Bitcoin Strategy ETF (BITO) – which we utilized to track the performance of the theme – returned 53%, vastly outperforming a 4% gain in the S&P 500 over the same span of time.

Since the start of the new year, MacroMicro data shows the share of BTC supply held in place for at least a year has declined from 70.6% to 68.9%, the largest decline witnessed since 2021. With Bitcoin still more than -26.0% below its all-time high, this shift in Bitcoin’s supply could suggest that the most aggressive portion of the boom period still lies ahead.

February 12, 2024: Bitcoin Rebound Revives Miner Shares Ahead of Highly-Anticipated Halving, Hash Rate Touches All-Time High →

January 17, 2024: New BTC Funds See Strong Net Flows in First Few Trading Days, Interest May Shift to Potential ETH ETFs →

January 9, 2024: Bitcoin ETF Decision on Deck as Optimism Builds, Level of Inflows Could Steer Crypto’s Course Ahead →

December 4, 2023: Gold and Bitcoin Break Out, Greenback Stagnant on Rising Expectations for Earlier Rate Cuts →

October 24, 2023: BlackRock Reaches Breakthrough Milestones in Bid to Launch Spot-Backed Bitcoin ETF →

October 16, 2023: Bitcoin Now Worth More Than Half of Crypto Market Cap, ETF Prospects Keep Majority of Supply Unspent →

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