Published: August 9th, 2023
HODLrs (i.e. cryptocurrency investors in for the long haul) are sitting on a record 14.499 million BTC, according to figures from blockchain data firm Glassnode.
Over the past seven days, the combined BTC balance held in long-term crypto wallets has risen by 43,939 Bitcoin or USD 1.273 billion.
To qualify as a HODL, an address must have held coins for a minimum of 155 days. Glassnode says its previous research shows addresses fitting this profile are statistically unlikely to sell or spend their Bitcoin holdings.
The amount of BTC under HODL control is roughly equal to 75 per cent of the number one cryptocurrency’s circulating supply. Glassnode says this points to changing sentiment, with investors choosing to hold onto their assets in hopes of realising long-term gains.
In February 2023, HODLrs controlled as much as 78 per cent of the Bitcoin blockchain’s circulating supply. Despite the drop, Glassnode analysts believe the more-or-less sustained pattern of long-term holding reflects a growing consensus that the leading cryptocurrency can be a store of value, not just a form of payment.
In a statement accompanying the report, Glassnode points to an associated plunge in BTC’s realized volatility.
'When we look at one-month to one-year timeframes, this has been the least volatile we have seen BTC since March 2020.’
Realized or historical volatility means the price volatility an asset has exhibited over a given period of time. It's normally calculated by tracking the closing price change from one day’s trading session to the next.
According to figures from CoinGecko, at time of writing, Bitcoin was changing hands at USD 29,689, up 0.2 per cent over the past seven days.
One of the first indicators of BTC’s return to form this year was news from large Bitcoin mining concern Iris Energy that its hash rate was on the rise again.
After weathering a significant downturn to its business in the final quarter of 2022, the compnay announced in February 2023 that its hash rate had risen to levels last seen before the FTX meltdown.
Over the next three months, the company’s self-mining capacity rose from two exahashes per second to five. A single exahash equates to one quintillion hashes, which represent possible solutions to the complex math equations required to approve and confirm a Bitcoin transaction.
According to figures from Glassnode, BTC's recent rise above USD 20,000 helped push the average Bitcoin miner back into the black, even with the hefty costs of operating a mining machine.
A press release on Iris Energy’s website said the firm had also agreed a financing deal with Bitmain, the manufacturer of Antminer cryptocurrency mining servers, to purchase a round of new S19j Pro miners. That will expand Iris’s data centre capacity by 4.4 exahashes per second.
The rise in Iris’s hash rate was enough to overcome the company’s loss of 3.6 exahashes experienced in November. The downturn in transaction volume forced it to mothball some of its mining infrastructure, which also secures loans worth ca. USD 100 million.
Like many mining firms in 2022, Iris found itself in a squeeze between spiking energy costs and cratering BTC prices. Cash flow fell to a trickle and made it difficult to cover payments to creditors.
Core Scientific, America’s biggest Bitcoin mining facility, ended 2022 with a bankruptcy filing. Another large firm, Argo Blockchain, saw its business crippled in December by a polar vortex winter storm that closed its Texas data centre.
Iris says it has experienced a turnaround and that current obligations under its 10 exahash contract with Bitmain have been fully resolved, leaving the company free of debt.
Iris’s upturn wasn’t the only sign that the crypto market might be returning to a happier place in Q1 2023.
Alongside BTC’s price rise, In October 22, analysts noted an extended correlation between BTC’s price and the price of gold. That pointed to investors using BTC as a hedge against broader volatility, particularly in stock markets. For an asset traditionally shunned by investors because of its penchant for sudden and dramatic dips and spikes, that represented a notable shift.
That same month, Bitcoin's price volatility largely vanished. Data from blockchain analytics firm Kaiko showed that BTC's 20-day volatility had been similar to the NASDAQ for the first time in nearly 24 months. In an unexpected swapping of roles, Bitcoin’s price had been more or less the same since the beginning of September. The NASDAQ and the S&P 500 both dropped by 12 per cent and 11 per cent respectively in the same period.
Bitcoin’s price has historically been correlated with technology stocks, though with a higher ‘beta’ (propensity for volatility) than other financial assets. Despite impressive gains posted in 2021, its high beta rating has kept many investors from relying on it as safe-haven asset. Despite a price plunge in June, BTC and other major cryptos have been some of the best-performing assets in Q3, after the mighty Greenback.
Bitcoin’s price did drop back to lows last seen in 2020 during the week commencing 10th October 2022, after core US inflation topped another 40-year high. Both BTC and equities fell on the news, however, before quickly bouncing back to their previous ranges.
The previous plunge seen in June 2022 followed the release of American inflation data for May, which showed consumer prices rising at a burning hot rate of at 8.7 per cent. Investors saw it as a sign that the Federal Reserve wouldn’t be altering its aggressive policy course any time soon, prompting a risk-off move that shifted money away from riskier assets.
However, while high inflation has held firm for months, crypto’s price action hasn’t surged or plunged with subsequent updates to the consumer price index (CPI) inflation measure. Stocks, on the other hand, have been in a slow-but-steady decline.
BTC’s newfound stability was all the more notable given the hawkish stance taken by central banks worldwide, which had turned many bonds into an opportunity for rapid gains. As Reuters reported in September, Fed policy sent bond yields skyrocketing in 2022.