According to cryptocurrency analytics firm Glassnode, the Bitcoin unrealized transaction output metrics suggest that “investors are staying put despite being at a loss,” with there being fewer transactions since the $14,000 peak seen in June.
1/ UTXO metrics suggest that investors are staying put despite being at a loss.
After #BTC's local top in June, fewer transactions require less UTXOs to be created.
That in combination with the declining price, caused the number of UTXOs in a loss to remain at ATH since weeks. pic.twitter.com/nGctzxaYl9
Glassnode’s data has been corroborated by BitInfo Charts, which recently observed that 11.58 million Bitcoin — more than 50% of all of the cryptocurrency in circulation, which is valued at over $70 billion as of the time of writing this — has not moved in over a year. This also means that less than 6.8 million BTC has changed hands in the last 12 months.
The fact that there’s a large portion of investors in the industry that have yet to move their coins, despite the near-100% performance this year, implies largely positive sentiment.
Why Are Bitcoin HODLers Still Bullish?
But why are they bullish? Why are the holders of the dormant Bitcoin fine with sitting through parabolic run-ups and brutal drawdowns? We don’t have a comprehensive list for the reasonings of so-called “HODLers,” but here are a few reasons why the cryptocurrency’s price outlook is looking wildly positive for 2020, despite the 50% downtrend seen in the second half of 2019.
Glassnode in a tweet published last week noted that the Market Value to Realized Value (MVRV), the ratio between market cap and realized cap, is “consolidating towards one,” which implies that gains are being realized by Bitcoin investors. A one reading of the ratio often marks a bottom for the cryptocurrency market.
1/ Weekly on–chain market observations:
The bottom is close – and once it happens, the reversal will be strong.
There’s also Unrealized Profit, which “paints a very similar picture.” “As investors have less profit to realize, BTC sell pressure starts to diminish allowing for upwards momentum to build,” the firm wrote noting the importance of the metrics.
It isn’t clear if Glassnode’s analytics implies that Bitcoin will range in the low-$7,000s for a while, or if the cryptocurrency will see one flash move lower. Though, whatever the case, the “bottom is close—and once it happens, the reversal will be strong.”
There’s also the positive fundamental trend that the industry has seen over recent months:
Institutional involvement: the involvement of institutions in the cryptocurrency space through Bakkt’s derivatives and through platforms like Fidelity could boost Bitcoin higher with time.
Halving: Next year, Bitcoin will see its block reward reduction, known as a halving. This will see the number of BTC issued per block be cut in half, acting as a negative supply shock to the market. Previous halvings have catalyzed bull runs in the past.
Lightning: Pundits like Tim Draper say that the adoption of Lightning Network and other Bitcoin-related applications will dramatically increase the value proposition of BTC, thus increasing its value due to higher demand.