21% of Bitcoin Hasn’t Moved for Five Years, Stroking Monumental Supply Shock

Journalist:
July 24, 2019


A record amount of bitcoin is sitting dormant, according to statistics by Coinmetrics. The report reveals that 21.6 percent of the total BTC supply hasn’t moved for five years – that’s almost 4 million coins. It suggests that bitcoiners are increasingly holding for the long-term.

Coinmetrics’ analysis appears to validate the cryptocurrency’s use case as a store of value. As the report explains:

“This potentially signals that BTC is increasingly becoming a store of value, as opposed to a medium of exchange.”

The figures also reveal that bitcoin’s available supply on the open market is diminishing. Couple that with the looming halving event in 2020, in which the crypto’s daily output will be cut by 50%, and we will soon see a monumental supply shock.

Investors will increasingly fight over a smaller supply of available BTC, theoretically driving the price higher.

Bitcoin: store of value

As CCN reported, only 1.3 percent of bitcoin transactions so far in 2019 came from merchants. It confirms that the world’s biggest crypto is not yet being used as medium of exchange.

Bitcoin’s track record as a store of value, however, is powerful. Over the five-year period tracked by Coinmetrics, holding the crypto would have returned 1,515 percent on your initial investment.

This narrative is increasingly taking hold. Even Federal Reserve chairman Jerome Powell admitted as much this month:

“Bitcoin is a good example. Really almost no one uses bitcoin for payments — they use it as an alternative to gold. It’s a store of value, a speculative store of value, like gold.”

4 million “untouched” coins: are they just lost forever?

There is a counter argument here. Many of those 4 million “untouched” coins over the last five years may simply be lost. As founding partner at Adamant Capital, Tuur Demeester, argues:

“5 years without updating your cold storage method is a long time in Bitcoin. Imo most of these coins are likely lost.”

Research from Chainalysis suggests that millions of bitcoins are indeed lost forever, on forgotten hard-drives, inaccessible computers or paper wallets thrown away.

Although many of the four million “untouched” bitcoins may be lost, it’s not the whole story. The shorter-term trend also confirms the store-of-value theory. The 180-day, 1 year, and 2 year charts show an increase in unmoved bitcoin. Bitcoiners are buying and holding long term.

Bitcoin supply shock coming

If the trend continues, it’s incredibly bullish for bitcoin. It means the available supply of BTC on the open market is decreasing.

This will become even more potent in May 2020, when the daily output of the cryptocurrency will be halved. Bitcoin’s halving events, which take place every four years, are designed to incrementally lower the daily supply of bitcoin to maintain the 21 million hard cap.

Together this will result in a monumental supply shock in its market. If the demand for bitcoin remains constant and the available supply decreases, simple supply and demand economics tells us the price must go higher.

Last modified (UTC): July 24, 2019 11:01

Tags: coinmetrics
Ben Brown

Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at benjamin-brown.uk or on Twitter at _Ben_Brown. Email ben @ benjamin-brown.uk.