Gustavo Faria2023-07-29

The Implications of HODLing Behavior on BTC Transfer Volume

Since the close of 2022, there's been a noticeable decline in on-chain transfer volume on the bitcoin network. Interestingly, this reduction is juxtaposed with evidence of the network expansion, as seen in the steady growth of active addresses during the same period. The decline in transfer volume, despite the network's growth, can be attributed to an increase in holding behavior. This behavior is indicated by the increase in the average dormancy of the coins and by the high number of long-term holders (LTHs), who hold about 80% of the circulating supply. The HODLing trend is exerting a steady pressure on the available supply of BTC in the market. This impact is intensified when taking into account the next halving, predicted for April 2024, which will halve the block rewards and, consequently, further decrease the supply of new BTC. However, a significant influx of institutional investors into the market has been observed. This influx could result in a demand shock, in a scenario where the supply is already being restricted by HODL behavior and the upcoming halving. Given this scenario, it is possible to anticipate a very interesting market dynamic for the coming months. The combination of limited supply, increased scarcity due to the halving, and potential increase in institutional demand can exert significant pressure on the price of Bitcoin. It is crucial to persistently track the interaction between supply and demand, as well as the behavior of HODLers, for a better understanding of future trends and implications on the network.