Swing Traders Are Driving the Bitcoin Market

Swing Traders Are Driving the Bitcoin Market
  • The majority of the Bitcoin supply is stored off-exchange
  • The investors controlling this supply are not selling
  • Price action is primairly influenced by swing traders controlling the liquid supply of Bitcoin

Illiquidity Reigns

Below is an overview of the different types of Bitcoin supply as well as their total amount:

  • Illiquid: Bitcoins that are held in cold storage for the long-term

  • Highly Liquid: Bitcoins that are on held in hot exchange wallets by active traders

The majority of the supply of Bitcoin is currently illiquid as investors are holding for the long-term. The illiquid supply has continued has gradually increase in recent months as investor's are accumulating.

Bitcoin Illiquid Supply

Long-term Investors Are Not Selling Yet

Although the investors controlling the illiquid supply of Bitcoin hold substantial influence on prices, they are keeping their coins dormant as they are holding for the long-term.

The chart below desrcibes the liveliness of Bitcoin. The lower the metric, the older the average of 'age' of all Bitcoins and vice versa for when the metric trends higher.

Coins have been becoming older at a significant rate since July, confirming the accumulation in the market, and the lack of sell pressure from long-term holders.

Bitcoin's Liveliness

Swing Traders Are Driving Prices

Given the lack of selling by long-term investors and the continued accumulation in the market, current price action in the market is primarily driven by investors controlling the highly liquid supply of Bitcoin.

The highly liquid supply of Bitcoin is controlled by active traders that are buying and selling coins amongst themselves. The market is therefore driven by swing trader.

This is an important dynamic to understand as specific metrics can be used to understand and predict market behaviour.