Therefore, 2023 is going to be an epic year for Bitcoin. It’s like Bitcoin woke up and decided to make a big splash. We’re talking about a huge jump, over 140% in value – that’s huge! This isn’t just about outpacing traditional competitors like gold; it’s also about leaving other cryptocurrencies in the rearview mirror. Let’s dive into the on-chain activity and exchange craze to try to piece together the clues as to what might happen to Bitcoin in the year ahead.
Bitcoin’s past explosive growth
According to a report from Glassnode, we are seeing a sense of déjà vu in the 2015-2017 and 2018-2022 Bitcoin cycles, judging by the time it took for the rally and the retracement since the all-time high (ATH).
In the current cycle, Bitcoin’s ATH has dropped by approximately -37%, very close to the -42% from 2013-2017 and the -39% from 2017-2021. Additionally, Bitcoin price has risen a solid 140% since FTX bottomed in November 2022, making it its strongest one-year return compared to +119% from 2015-2018 and +128% from 2018-2022 Rate.
Exchange Activity: Bitcoin’s Trading Paradox
While 2023 was shaping up to be a stellar year for Bitcoin, the number of transactions depositing funds to exchanges unexpectedly hit a multi-year low. But more crucially: Glassnode data shows that on-chain transaction volume in and out of exchanges has surged, jumping from $930 million to a staggering $3 billion, an increase of 220%.
This discrepancy between the drop in deposits and the surge in trading volume makes us wonder: What is driving the heightened trading activity, if not retail investors? On the one hand, the decrease in deposit transactions may indicate that investors are becoming more cautious about leaving assets on exchanges, perhaps due to security concerns or a desire to have better control over their funds. This is where the potential shift to non-custodial exchanges like StealthEX comes into play. With the FTX incident still on everyone’s mind, it’s no surprise that these platforms where private keys can be saved are becoming more and more popular.
On-chain transaction volume has increased significantly, showing that trading and speculation are more active than ever. It appears that while investors may be shying away from depositing funds, 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 size of exchange deposits approaching the previous all-time high of $30,000 per deposit, according to Glassnode data.
Additionally, the fact that exchange deposits have fallen from around 26% of all trades in May to 10% today, but the decline is more modest (around 20%) when adjusted for Inscription adds to this narrative Another layer of content. There is no denying that we are witnessing a dynamic shift in the blockchain space as new transaction types emerge and new players seize the limelight.
Short-term holders cash out
Short-term holders (STH) have made some smart moves recently, cashing out their Bitcoin investments at the right time. Glassnode statistics prove this – the STH supply profit-loss ratio has been hovering above 1 since January. This means these savvy traders have been playing the “buy the dip” game, a classic move in an uptrend. However, these STHs are moving large amounts of tokens to exchanges, and the gap between the price they are paying and the price they are selling for is quite large.
In the first week of December, when Bitcoin hit $44,200, STH took action and seized the opportunity to take profits. It’s as if they saw the wave coming and rode it all the way to shore, taking advantage of the need for liquidity. The activity brought a temporary halt to Bitcoin’s rise, showing the influence STH has on the cryptocurrency’s price.
Summary: Bitcoin and Beyond
So, there you have it – the story of Bitcoin in 2023 is a mixture of triumphs, challenges, and excitement. Bitcoin, in its digital world, has always intrigued us with its roller-coaster ride of strong recoveries and declines, which resonate with historical patterns and even its recent rebound despite a few bumps in the road. The unpredictable ebb and flow of something at play and exchange weaves together to create a complex and intriguing story. Whether you’re here for the highs, lows, or out of sheer curiosity, watching Bitcoin’s movements is certainly worth watching.
This is a guest post by Maria Carola. The views expressed are entirely their own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.
