Bitcoin: On-chain outlook, Edition #4 (08/06/21)

El Salvador adopts Bitcoin as legal tender, and the Taproot network upgrade reaches consensus and is locked in. How will this impact Bitcoin wallet and exchange supply?

Bitcoin Supply on Exchanges

We’ve had some interesting developments in the last couple of weeks. El Salvador adopted Bitcoin as a legal tender and a significant network upgrade to the Bitcoin protocol was pushed through, ‘Taproot’, receiving its 90% mandate.

We wanted to follow up on some key metrics we highlighted in Edition #1 and how they have changed in light of the recent news and price action for today's on-chain edition.

Bitcoin supply on exchanges continues to trend lower since the May price correction. However, there has been a recent uptick in supply exchange since the recent bounce back from the 31-32k region (see red circle).

Bitcoin supply outside of exchanges is slowly increasing with an uptrend forming (see purple circle). This could suggest that whales are adding to their holdings. For confirmation, let’s have a look at wallet holdings.

Bitcoin Wallet Holdings

Both wallet holdings bands for 100 to 1k BTC and have 1k to 100k BTC have started to stabilise.

Interestingly, you can see smaller band holder (100 to 1k) increase on price spikes indicating that smaller holders are either adding to their holdings at local price tops or larger holder bands are distributing their coin and falling back into the smaller band holder group.

See 10 June as an example of this inverse relationship: the yellow circle indicates the increase of smaller holders as the larger holder band decreases.

When considering how these metrics have evolved since the May crash, some signs of accumulation by certain BTC holder bands coupled with supply outside of exchanges started to uplift again. We will continue to monitor these, especially if the price revisits the 40 to 50k region.

See you again for the next update.

- q

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