So, 2023 has been a very epic year for Bitcoin. It's as if Bitcoin woke up and decided to flex its muscles for a long time. We're talking a huge jump, over 140% – that's huge! It's not just about beating traditional competitors like gold; It's also about leaving other cryptocurrencies in the rearview mirror. Let's delve into the current on-chain events and stock market hype, trying to piece together the clues to see what Bitcoin might do in the coming year.
Bitcoin blast from the past
According to the Glassnode report, we are seeing a repeat of Bitcoin's 2015-2017 and 2018-2022 cycles in terms of how long it takes to bounce and pull back from the all-time high (ATH).
In the current cycle, Bitcoin has seen a decline of around -37% ATH, which is very close to -42% in 2013-2017 and -39% in 2017-2021. Additionally, since the FTX drop in November 2022, Bitcoin prices have risen +140%, making it the strongest one-year return compared to +119% in 2015-2018 and +128% in 2018-2022.
Stock Exchange Activity: The Paradox of Bitcoin Trading
Although 2023 has been a great year for Bitcoin, the number of transactions depositing funds on exchanges has surprisingly reached multi-year lows. But here's the kicker: Glassnode data shows that on-chain on-chain and off-exchange flow volume has skyrocketed, jumping from $930 million to a staggering $3 billion — that's a whopping 220% increase.
This discrepancy between fewer deposits and higher trading volume makes us wonder: what is driving the intense stock market activity if not retail investors? On the one hand, the decline in deposit transactions may indicate that investors are becoming more cautious about leaving their assets on exchanges, perhaps due to security concerns or a desire to have greater control over their money. This is where the potential shift towards non-custodial exchanges like StealthEX comes into play. With the FTX drama still on everyone's mind, it's no surprise that these platforms where you can keep your private keys are becoming more popular.
There is a serious spike in on-chain trading volume which shows that trading and speculation are thriving more than ever. It appears that while investors may avoid depositing their money, they are actively trading and moving large amounts of money. This could be a sign of growing institutional interest, especially as we see the average deposit size on exchanges approaching the previous all-time high of $30,000 per deposit, according to Glassnode.
Moreover, the fact that interchange deposits as a share of all transactions have fallen from about 26% in May to just 10% today, yet the decline is much more modest (about 20%) when adjusted for inscriptions, adds another layer to this narrative. It is undeniable that we are witnessing a dynamic transformation in the blockchain space with new types of transactions emerging and new players grabbing their share of the limelight.
Short-term holders spend their money
Short-term holders (STHs) have made some smart moves recently, cashing in on their Bitcoin investments at just the right time. Glassnode has the stats to prove it – the STH supply P/E ratio has been hovering above ~1 since January. This means that these smart traders are playing the “buy the dip” game well, which is a classic move in uptrends. However, these STHs are transferring large amounts of coins to exchanges, and the gap between what they paid and what they are selling for is very large.
In the first week of December, when Bitcoin reached $44.2K, STHs jumped into action, seizing the moment to take profits. It's as if they saw the wave coming and rode it all the way to shore, taking advantage of the fluidity of demand. This activity has temporarily halted Bitcoin's rise, demonstrating the impact of STHs on cryptocurrency prices.
Wrapping it up: Bitcoin and beyond
So, there you have it – Bitcoin's story for 2023 is a mix of triumphs, challenges, and a lot of excitement. Bitcoin, in its digital world, never fails to keep us fascinated with its volatile journey of strong recoveries and declines that resonate with historical patterns, even recently bouncing despite some bumps in the road. The play of STHs and the unexpected ebbs and flows of exchange activities tie together a complex but interesting story. Regardless of whether you are watching the highs or lows, or simply out of sheer curiosity, monitoring Bitcoin's movement is undoubtedly something to behold.
This is a guest post by Maria Carolla. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
