A new report by blockchain analysis firm Chainalysis posits that only about 19% of all mined Bitcoin (BTC) – approximately 3.5 million BTC – moves frequently between crypto exchanges that is used for trading.
Bitcoin Investors Eyeing Long-Term Gains
Blockchain analysis company Chainalysis recently published a report that explores the implications of the movement of mined BTC to date. To date, a total of 18.6 million Bitcoin has been mined which can be segregated into three broad buckets.
According to the report, close to 60% of the mined Bitcoin is held by crypto entities – including retail and institutional investors. Interestingly, these HODLers have never sold more than a quarter of BTC they’ve received, signaling the sentiment that they hold a long-term investment outlook toward Bitcoin. This finding corroborates an earlier study by Binance which hinted that major Wall Street players are invested in digital assets in the long run.
Another 20% of BTC hasn’t moved from its current wallet addresses for five years or longer. The report dubs this Bitcoin as “lost Bitcoin.” Similarly, the remaining 3.5 million Bitcoin is the amount of BTC that frequently changes its address between crypto exchanges. Chainalysis dubs this Bitcoin as BTC used for trading.
(Source: Chainalysis)
Delving deeper into the question of what investors are primarily responsible for constantly moving the 3.5 Bitcoin between exchanges, Chainalysis found that a maximum of 340,000 investors are active Bitcoin traders on a weekly basis. Further breaking down these active Bitcoin traders between retail and institutional investors, Chainalysis found that the former form a clear majority.
The report defines retail traders as traders who deposit less than $10,000 worth of BTC on exchanges at a time. According to the study, close to 96% of all transfers sent to exchanges on an average weekly basis can be attributed to retail investors.
However, the liquidity of the crypto market is largely maintained by institutional investors, responsible for close to 85% of all the USD value of BTC sent to exchanges. The study also holds these professional investors responsible for the dramatic decline in the price of Bitcoin in March 2020 ahead of the COVID-19 pandemic in North America. Interestingly enough, however, professional traders pale in comparison to retail investors in terms of numbers.
Few Exchanges Dominate Bitcoin Liquidity
According to the report, the four largest crypto exchanges since 2018 – Binance, Huobi, Coinbase, and Bitfinex – stocked in close to 40% of all Bitcoin received by exchanges in 2020. The next ten largest exchanges took in about 36% of Bitcoin while the remaining hundreds of exchanges shared the remaining 24% of Bitcoin among them.
(Source: Chainalysis)
Going into the finer details of exchange activity, the study found that among the three types of exchanges: crypto-to-crypto (C2C), crypto-to-fiat (C2F), and fiat-to-crypto (F2C) exchanges, C2C exchanges contributed the largest chunk of activity at 42% of all Bitcoin flowing between exchanges. Notably, C2C exchanges made up just 18% of the Bitcoin transfer activity.
In related news, Fidelity Investments recently found that almost 33% of institutional investors hold crypto assets including Bitcoin, and Ether (ETH).
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