As interest in bitcoin exchange-traded funds (ETFs) heats up, a new report from blockchain analytics firm Glassnode examines how much bitcoin is actually available for purchase. The report, titled “How Many Bitcoin Are For Sale?” published on June 26, 2023, looks at exchange flows and onchain metrics to gauge bitcoin demand and supply dynamics.
Bitcoin Demand Shifts: Glassnode Highlights U.S. Recovery and Asia’s Lead
The Glassnode report found that while Asia-based exchanges saw net inflows of bitcoin (BTC) in 2023, U.S.-based exchanges saw net outflows. This suggests weaker relative demand from U.S. investors compared to those in Asia so far this year. However, Glassnode suggests a wave of spot bitcoin exchange-traded fund (ETF) filings in the U.S. in recent weeks signals growing U.S. institutional interest.
To estimate bitcoin’s “available supply,” Glassnode’s report isolated the most active portion of circulating supply, dubbed “hot supply.” This hot supply, representing just 3.5%-11.3% of the total supply, has a velocity of at least one transaction per day. With a current hot supply of around 511,000 BTC, Glassnode estimates around 983,000 BTC (worth $29.5 billion) is actively in play.
“Our recent newsletters highlighted the ongoing transfer of wealth from investors with high time preferences towards HODLers,” Glassnode’s report explains. “This pattern of growing illiquidity is a primary component of all prior Bitcoin bull markets. However, while a ‘supply shock’ can positively affect price discovery, the sustainability of the trend still depends on the influx of new demand entering the market.”
Notably, Glassnode highlights that this is on par with open interest in bitcoin perpetual futures contracts, suggesting spot and derivatives markets are similarly sized. For perspective, Glassnode researchers believe 983,000 BTC could absorb the remaining Mt. Gox bankruptcy coins (137,000 BTC) and U.S. government-seized coins (204,000 BTC).
“From this, we can see that a single quarter of similar demand inflows may be capable of absorbing the full distribution from both sources,” the Glassnode report details.
Expanding hot supply historically accompanied bull markets as existing holders distributed coins, Glassnode researcher Cryptovizart details. Quarterly hot supply growth from 400,000-900,000 BTC preceded rallies between 26%-154%. Recently, short-term holder cost basis of around $26,000 provided support, suggesting a shift away from bearish sentiment, the researcher notes.
Glassnode concludes U.S. demand appears to be recovering as new ETFs are proposed. With limited actively circulating bitcoin, new inflows could readily absorb known future supply shocks. Recent onchain trends suggest the market has shifted to an accumulation mentality, setting the stage for a renewed bull market.