85% of Bitcoin’s supply rests in the wallets of hodlers because:

• Holders have strong confidence in the asset
• Long-term holders only trade their profits to accumulate more bitcoin 

Background story

Bitcoin’s on-chain metrics are positive despite the pressing bear market of 2022.

Last month, the BTC supply held by retail investors reached 17% (following an on-chain analysis by Glassnode). Note that retail investors as those holding fewer than ten coins. 

Usually, such investors are the first to panic sell whenever there is a market decline or trace of media FUD. We saw that happen in 2018 and in 2022 as well.

Also, when there is a positive shift in the market, these retail investors show up late. They only get in after the bull market has been fully established.

On the other hand, long-term and institutional investors are smarter and accumulate Bitcoin during the bear season. Currently, 85% of the circulating supply of Bitcoin is owned by long-term holders.

According to Glassnode, the ‘hodler‘ supply hit a record high of 13.9 million BTC in December 2022. This amount of holdings is equivalent to around 72.3% of the circulating supply. 

Note also that long-term holders are those keeping BTC for more than 180 days.

So, why do investors hold Bitcoin for so long?

Crypto expert, Jude Umeano is of the opinion that investors have strong confidence in Bitcoin.

They perceive it as an asset and treat it as such. So, they keep accumulating BTC for rainy days. In the future, they can use their holdings as collateral for huge loans.

Secondly, he mentioned that many traders believe that Bitcoin will continue to do well.

Rather than sell their BTC holdings, they use only their profits to trade. And most times, these profits are reinvested into the asset.

Furthermore, Jude suggested Ethereum, the 2nd most valued cryptocurrency, as another asset with a strong community like Bitcoin.

Coinbase shares the same thought, suggesting that “high-quality” assets will be preferred over altcoins in 2023.

That is to say, institutional investors will primarily favor BTC and ETH in the following months.

But the National Bureau of Economic Research begs to differ.

It noted that the Bitcoin ecosystem “is still dominated by large and concentrated players, be it large miners, bitcoin holders or exchanges”. 

As a result, bitcoin is susceptible to systemic risk, and most gains from further adoption will likely fall disproportionately to a small set of participants.

Moreover, other assets may be going in the same lane.

ETH’s concentration among large holders stands at 39%. For Polygon, it is  85% while DOGE  has a 65% concentration of large holders (as of 8 December 2022).

In summary, there is an undeniable conviction in Bitcoin despite the uncertainty of the market.

I hope you enjoyed this read. Please let me know your thoughts about holding bitcoin long-term in the comments section below. Also, share this post with your friends, thank you!

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