According to Coinbase, long-term bitcoin investors have managed to keep their holdings even though speculators fled, driving the cryptocurrency down below $20,000
In the Tuesday monthly outlook, David Duong, Head of Institutional Research at Coinbase stated that recent BTC sales were almost entirely by short-term speculators.
Investors’ continued holding of cryptocurrency is a sign that they are confident that it will survive the Federal Reserve-induced bear markets and eventually flourish as digital gold or fiat alternatives.
Duong called the retention of bitcoin ownership by investors a positive indicator of sentiment, as it ensures demand-supply balance in face of speculator buying, which is a common feature in a bear market.
Coinbase Analytics has tracked on-chain data that shows that investors hold approximately 77% of total bitcoin supply. Although the number is slightly lower than the January high of 80% in early January, it still exceeds the 60% peak during the 2017 bull run. In 3.5 years, a substantial amount of wealth was transferred from traders or speculators to investors.
The report, titled “The Elusive Bottom”, defines long-term investors to be wallets that hold the cryptocurrency for at most six months.
Speculators aretypicallysophisticated participants or retail traders who purchase assets for short periods and employ strategies to profit from short-term price gyrations. Speculators as well as traders are more sensitive than others to macroeconomic changes, such as changes in Fed policy.
Bitcoin is now less than half its previous value, at $20,000 in 2017. This is primarily due to the Fed’s decision not to withhold liquidity to combat high inflation.
Many trading firms and miners, who are responsible for creating coins, have had to sell off their assets to remain solvent due to poor risk management in the crypto industry. Three Arrows Capital, with billions under management, went bankrupt . The bankruptcy of the fund has affected several prominent crypto companies, including Celsius Network and Voyager Digital, a lending platform.
Duong stated that “Solvency worries have caused an accumulation of realized loss, exposing vulnerabilities within other parts of crypto ecosystem,”
According to coinDesk data, Bitcoin was trading at $19,680 as of press time. This is a 0.5% decrease in 24 hours.