Bitcoin's Epic Year
The year 2023 has proven to be a momentous one for Bitcoin, awakening with a surge of over 140%. This remarkable leap not only outpaced traditional competitors like gold but also left other cryptocurrencies far behind. Let's delve into the network activity, analyze the causes of exchange frenzy, and explore what might be on the horizon for Bitcoin in the coming year.
Bitcoin: A Call from the Past
According to Glassnode's report, there's a sense of déjà vu when examining Bitcoin's cycles in 2015-2017 and 2018-2022 concerning recovery time and the decline after the all-time high (ATH). The current cycle witnessed a drop of approximately -37% from its ATH, closely resembling the -42% in 2013-2017 and -39% in 2017-2021. Following FTX's minimum in November 2022, Bitcoin's price surged by +140%, marking the highest annual return compared to +119% in 2015-2018 and +128% in 2018-2022.
Exchange Activity: Bitcoin's Trading Paradox
Despite 2023 being a record-setting year for Bitcoin, the number of deposit transactions unexpectedly reached multi-year lows. However, intriguingly, Glassnode data reveals a sharp increase in on-chain payment volumes on exchanges, skyrocketing from $930 million to a staggering $3 billion – a 220% surge.
This discrepancy between fewer deposit transactions and a rapid increase in volumes prompts contemplation. What stimulates exchange activity if not retail investors? Reduced deposit operations may indicate investor caution about placing assets on exchanges, perhaps due to security considerations or a desire for more control over their funds. This is where a potential shift towards non-custodial exchanges like StealthEX comes into play. Given the FTX drama, not surprisingly, platforms where you can retain control of your private keys are becoming increasingly popular.
Active growth in on-chain trading volume is evident, with speculation thriving more than ever. While investors avoid depositing funds, they actively trade and move substantial amounts of money. According to Glassnode, this may be a sign of increasing institutional interest, especially as the average deposit size on exchanges approaches the previous record of $30,000 per deposit.
Additionally, the fact that the share of exchange deposits as a percentage of all transactions dropped from 26% in May to just 10% today adds another layer to this narrative. Undoubtedly, we observe a dynamic shift in the blockchain sphere, with new transaction types and players garnering attention.
Short-Term Holders Reaping Profits
Short-term holders (STH) have recently made savvy moves, capitalizing on their Bitcoin investments at opportune times. Glassnode offers statistics confirming this: the profit-loss ratio from STH positions has remained above ~1 since January. This suggests that these adept traders played the classic "buy the dip" move wisely in an upward trend. However, these STHs are moving significant amounts of coins to exchanges, and the gap between what they pay and what they sell for is quite substantial.
In the first week of December, when Bitcoin reached $44.2k, STHs began to act, taking advantage of the moment to secure profits. They seemed to anticipate an upcoming wave and rode it to the shore, benefiting from liquidity demand. This activity slightly slowed Bitcoin's ascent, demonstrating the impact of STHs on cryptocurrency prices.
Summing Up: Bitcoin and Beyond
The year 2023 for Bitcoin is a blend of triumphs, challenges, and excitement. Bitcoin continues to captivate us with its rollercoaster of strong rallies and dips resonating with historical patterns, recently recovering despite some obstacles. The STH game and the unpredictable ebb and flow of exchange activity weave a complex yet fascinating narrative. Whether you're interested in Bitcoin's highs and lows or just here out of curiosity, observing the movement of Bitcoin is undoubtedly worth your attention.
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