Unlike speculators, holders resist the volatility and fall in the prices of Bitcoin. Effective Bitcoin capitalization has fallen below market capitalization.
Some metrics seem to indicate that short-term investors in Bitcoin, as well those new holders of the cryptocurrency, are responsible for the price decline in the markets.
According to Coin Metrics, the holders of 281,000 BTC, which they had not moved for 30 days, put them back into circulation between March 11th and 12th. At the same time, holders of only 4,131 BTC, who had not moved them for at least a year, also put them into circulation on the network.
The company has been dedicated to monitoring the time that Bitcoin holders spend to mobilize their funds. It explains that, according to some of its metrics, those price movements stem from transactions made by Bitcoin holders with little seniority within the ecosystem.
Regarding the 281,000 BTC, which corresponds to funds that holders have not touched in/for 30 days, this has been the fourth largest in 8 years. Therefore, it seems that the recent changes in the price of BTC in the market did not affect long-term holders.
Besides, Coin Metrics warns that investors are selling at a loss, according to data collected under the Spent Output Profit Ratio (SOPR) index. This reflects the price at which holders bought Bitcoin (according to the input was created) and at which they sold it (according to the date when the output was created). This index reached its lowest point since 2012 on March 12th, indicating an all-time volume of sales at a loss.
Another metric suggests that long-term holders place much more value on Bitcoin than short-term investors, or “speculators”, as Coin Metrics define them. The Market Value to Realized Value (MVRV) index is a relationship between the appreciation that long-term investors give to Bitcoin and current market capitalization. This metric, which is called effective capitalization, is based on the price of Bitcoin when the holders last moved that group of coins or, in case they had never spent them when they mined them.
In conclusion, Coin Metrics states that Bitcoin is at an attractive time to buy, due to the current price and the positive indicators of its value. However, it is not yet clear what lies behind the recent market volatility, so it remains to monitor financial events in the cryptocurrency market over the next few weeks.
However, it is clear that the coronavirus alarm, along with the consequent collapse of the financial markets, is the main reason for this drop in prices. Bitcoin holders, as well as new investors, had never expected this disease to reach such critical levels that it would even affect the global economy.
This is not the first time that the Bitcoin prices have dramatically dropped and been able to recover its all-time highs. Of course, it is only a matter of time to see Bitcoin rising back to the levels that it had before last Black Monday on March 9th.
By Willmen Blanco