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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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The state of crypto – October 2022
Mads Eberhardt
Cryptocurrency Analyst
Summary: In the month of September, Bitcoins kept flowing out of exchanges, whereas the percent of Ether stored on exchanges has not changed despite a large spike in deposits. For both Bitcoin and Ethereum, it seems that the circulating supply is rotating from institutional to retail investors.
Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.
Short-term
Bitcoin experienced a small net outflow from exchanges from around 9.1% to 8.9% of the total Bitcoin supply. This may indicate that fewer Bitcoin holders are considering selling in the imminent future. The supply of Ethereum on exchanges is identical at 14%. Yet, both cryptocurrencies were heavily deposited to exchanges during September likely due to the price declines alongside the increased volatility early in the month.
Despite the high volatility, it seems that fewer Bitcoins that had not been moved in 365 days were transferred in the past month. This may hint that most long-term Bitcoin holders are not interested in selling at these prices. On the contrary, more Ether were moved that had not been moved in 365 days, but this is likely mostly because of the Ethereum merge, at which event many Ethereum holders were more comfortable holding Ether on exchanges contrary to their own wallets.
For Bitcoin, the supply shifted from Bitcoin-rich wallets to wallets with fewer Bitcoins, as an increasing part of the total supply is kept by wallets storing between 0 – 10 BTC. In that connection, wallets containing between 10 – 1,000 and +1,000 BTC declined in importance, although they still store the majority of the total Bitcoin supply. Wallets storing between 0 – 10 ETH also rose in weight. This may suggest that retail investors are accumulating Bitcoin and Ether, whereas institutional investors are selling. If that is a correct observation, only time will tell which party is on the right track.
Long-term
The circulating supply of Bitcoin and Ethereum that has been moved over the past 5 years continues to decline. This suggests that the circulating supplies are less than the total supply of both Bitcoin and Ethereum, since many no longer have access to their cryptocurrencies, minimizing potential sell pressure. More, it indicates that no large inactive whale has suddenly turned active by moving Bitcoins or Ether recently which could push prices down.
The average Bitcoin holder is estimated to be slightly less underwater than last month from 28.3% to around 26.5% in loss. Though, the price decline in Ether is estimated to have been tough to Ether positions, as Bitcoin and Ether holders are nearly as much underwater now.
The outflow out of exchange-traded crypto products e.g., ETPs and mutual funds has been rough to Ethereum. The second-largest cryptocurrency recorded an outflow of $65.1mn, whereas Bitcoin recorded a minor inflow equal to $3.2mn. Based on the outflow for Ethereum, it seems that “buy the rumor, sell the news” was also present in exchange-traded products in regard to the Ethereum merge.
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