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Money Supply and Bitcoin Distribution

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Supply and demand are the two most important forces in any market. As the first thing that kids learn when they begin studying economics, it is a tool that can be applied to almost anything

The company Chainalysis provides analysis of recent occurrences on the blockchain and how they affect the overall economics of the market. Although Bitcoin is thought to be anonymous in the layman’s world, those familiar with the technology will tell you it is easily traceable with the right tools. Chainalysis uses compliance and investigation software to break down the trends on a macro-scale.

Segmenting Bitcoin Holders

It is tempting to think of investors as a homogeneous aggregate of hardcore Bitcoin enthusiasts, but the reality is much more complicated than that. Chainalysis classifies the coin on a spectrum according to how liquid the coins are. The range starts at the level of speculators and goes all the way to lost coins (or those that haven’t even been mined yet).

The most liquid category is that of the speculators (or traders). They are short term investors, and are mostly looking to make a quick buck before selling out of their position. The rise of so many trading platforms is clear enough evidence that this segment is continuing to increase. As of April 2018, it composed 35% of the current money supply.

Bitcoins used in transactions are the second-most liquid type of Bitcoin. In a way, these Bitcoin are being used for the reason Bitcoin was originally invented for: facilitating economic exchanges without the involvement of a bank. These can often be estimated based on the movements of the wallets belonging to major services.

Investment coins, or the coins held by long-term investors (HODL’ers) are the least liquid of the coins in circulation. Yes, there are the 4 million unmined coins and 2.3 million lost coins, but these coins are actually held by investors, but are not expected to surface any time soon.

The lost coins are estimated based on the amount of time it has been since the wallet in question last spent Bitcoin. Users aren’t expected to report it every time they lose the private key to their wallet, so the best method of estimating this portion of the money supply is by using 2014 as a cut-off date for lost wallets. It is always possible the owner of the wallet is a long-term holder, but this is an inexact science.

What Do the Trends Mean?

One of the more interesting observations is that the proportion of Bitcoin used to make transactions by major services has remained stable over time. This could mean several things – the services could be managing their wallets carefully, or the industry’s zero-sum structure could prevent the share of money supply from growing too high.

Investment coins actually used to compose a much larger proportion of the money supply, but over the last year their share has decreased from 72% to approximately 50% of the share. This is likely a reflection of the increased trading activity and rent-seeking on the part of speculators.

Another implication here is that investors have cashed out of their holdings in a meaningful way. This can be interpreted in one of two ways: either the investors lost faith in Bitcoin, or they wished to lower their adjusted cost base in the coin by buying back their coins on the dip.

To put things in monetary rather than percentage terms, during the crash of early 2018 investors sold off $30 billion of Bitcoin. This Bitcoin was picked up by speculators, which is a sign that even more volatility can be expected in the Bitcoin space in the future now. These speculators are putting a downward pressure on the coin by not holding long-term, and more investors take a long-term view on Bitcoin, we can expect these trends to continue.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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  1. Mister.Ticot

    July 11, 2018 at 4:30 pm

    What about the people who recently bought coin with investing in mind? Having held the coin for only a short duration now, wouldn’t they be count as part in speculators category in those statistics?

    Another way to put it: can those numbers give away people intention when they recently bought the coin?

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Bitcoin

Update: Bitcoin Price Spikes 8% in One Hour as Momentum Builds

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The bitcoin price spiked on Tuesday shortly after Hacked predicted a possible bullish breakout for the world’s largest cryptocurrency.

BTC/USD Price Update

Bitcoin is up 10% over the last 24 hours, including an 8% spike between 13:39 UTC and 14:24 UTC. According to CCN, the currency peaked at $7,483, its highest in five weeks.

The bitcoin price would later consolidate around $7,340 for a total market capitalization of $126 billion.

Just a few hours earlier, Hacked predicted that an imminent breakout was likely after prices breached the 20-day and 50-day moving averages. At the time, the Relative Strength Index (RSI) was in the mid-60s, which confirmed the bullish pattern.

Crypto Market Rallies

In typical fashion, the broader cryptocurrency market followed bitcoin’s upward trajectory, with the majors reporting 24-hour gains of between 6% and 9%. The total cryptocurrency market is now valued at $292 billion, the highest since June 12.

Trade volumes have also spiked, reaching $17 billion over the past 24 hours. That too is the highest level since late June.

As Hacked previously reported, cryptocurrencies are being propelled higher on speculation that major institutions are planning to enter the blockchain arena.

On Monday, it was also reported that Coinbase received regulatory approval to start listing so-called security tokens, becoming the first U.S.-regulated platform to do so. The approval was granted by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, which felt that Coinbase’s strategic acquisition of three companies was enough to open regulatory pathways to securities listings.

The acquisitions included Keystone Capital Corp., Venovate Marketplace Inc. and Digital Wealth.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 498 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Bitcoin

Bitcoin Price Rally Shows Promise After Technical Breakthrough

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Bitcoin is eyeing a potentially bigger breakout this week after prices crossed the 20-day and 50-day moving averages, signaling renewed momentum for the largest cryptocurrency.

Bitcoin Price Levels

The bitcoin price touched a new intraday high of $6,761 on Tuesday, as trading volumes topped $4.9 billion for the first time since July 6. More importantly, the recent uptrend pushed prices above their short-term moving averages. The 50-day MA was breached for the first time since May.

Relative strength has also shot up into bullish territory, with values rising above 60, according to Barchart data.

Bitcoin attempted a similar breakout last weekend but was eventually pushed back to the $6,100-$6,200 region as part of a market-wide breakdown that came to a head on July 12. However, BTC/USD continued to defend $6,000, a sign that the market had put a firm bottom on prices.

With a short-term bottom established, prices may be poised for a re-test of the July 8 high of $6,886. From there, the psychologically significant $7,000 comes in play.

Crypto Market Consolidates

The broader cryptocurrency market continued to show poise Tuesday as the majors continued to trade near weekly highs. As Hacked reported earlier, the cryptocurrency market cap swelled more than $20 billion at the start of the week amid reports that BlackRock is exploring a potential entry into the blockchain arena.

Positive news has kept coming after IBM confirmed it is working on a new stablecoin project to help banks streamline international payments.

Bitmain, China’s largest bitcoin mining manufacturer, was also in the headlines after announcing a stake in Block.one, the parent company behind EOS. CCN also reported Tuesday that Bitmain has set up a 20,000 square-foot facility in Silicon Valley ahead of its planned initial public offering (IPO) later this year.

Last month, the company concluded a successful $400 million funding round, which catapulted it to the top of the global blockchain ranks.

As Hacked previously reported, the cryptocurrency market has largely discounted the wave of positive developments taking place over the past three months, a sign that regulatory scrutiny was keeping investors on the sidelines. Trading activity at the start of the week suggests more capital is flowing into the market, though the absence of new traders is generally reflected in overall trade volumes.

That said, 24-hour trade volumes crossed $15 billion on Monday for the first time in over a week.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 498 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Frenzy to Get Bitcoin ETF Listed Is Clogging Up the SEC’s Email

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The Securities and Exchange Commission is apparently fielding a tidal wave of messages from crypto-currency enthusiasts after an exchange recently sought approval to list a Bitcoin ETF.

It has been three weeks since the SEC first asked for feedback on Cboe Global Markets Inc.’s request to change its listing rules and allow a crypto exchange-traded fund.

Since then, more than 90 individuals have submitted comments. That’s 10 times the number of responses the SEC previously received when it asked for opinions on another Bitcoin ETF listing back in April. It is apparent that the appetite for such a product is far higher then before.

The over-enthusiasm of the blockchain community is also spilling over into other areas of regulation. For instance, out of 19 of 21 comments left on the agency’s potential ETF rule change are desperately begging for the Bitcoin fund. Furthermore, the actual proposal for the ETF doesn’t mention Bitcoin, crypto or blockchain on any of its 286 pages whatsoever.

The SEC has spent much of the last 12 months preoccupied with damping attempts to bring a Bitcoin ETF to market.

After the currency’s precipitous climb to more than $18,000 last year, the commission in would-be issuers to withdraw their applications until asset managers could reliably answer a series of questions on custody, liquidity, market manipulation, valuation, and arbitrage. Bitcoin has since fallen to around $6,600, although it was rallying all of yesterday.

Although there were many alternately entertaining and informative comments, the commenter who best summed up the fervor of crypto left his comment under the pseudonym, “Noah’s Ark of Crypto.”

He said, “To all the Peter’s Bob’s, Linda’s and Nancy’s reviewing this bill, this all comes down to one thing: Innovation. Do you want to be at the forefront of historical financial technology or do you want to be left behind as the plebs of the western world?”

Brutal. But potentially warranted.

A more serious take was left by an analyst ostensibly employed by analyst firm Ernst Young. The commenter wrote, “Creating regulations for crypto ETF’s allows for certainty and reliability to emerge in a market that desperately needs it.

As the rise of crypto use-cases becomes more prolific it is of the utmost importance to the crypto community, as well as in the best interest of the United States financial system at large, to engage in drafting regulations to mitigate fraud, corruption, and dubious practices.

The SEC, coupled with other levers of regulation such as FINRA, hold the largest opportunity to propel cryptocurrency to new all-time highs by shoring up uncertainty in the market. Please don’t squander this opportunity. Thank you.”

Both comments seem to share the assessment that if the SEC does not relax its oppositional stance the only losers will be the United States relative to other countries.

Since this new filing was released for comment, the SEC has also postponed a decision on another prospective Bitcoin-related listing change until later this September.

Both requests were made by Cboe, which has repeatedly urged the SEC to consider approving crypto ETFs. It will be interesting to observe if the SEC has changed its mind and/or will bow to public pressure.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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