Bitcoin Circulation Rate Remains Low, Why This Could Be Bad For Rally

Keshav Verma

2 years ago

3 mins read

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On-chain data shows the Bitcoin circulation rate has continued to be low recently, something that may be bad news for the current BTC rally.

Bitcoin Circulation Has Remained Low Despite Recent Price Surge

According to data from the on-chain analytics firm Santiment, 105,000 BTC is moving per day currently. The relevant indicator here is the “circulation,” which measures the unique daily number of Bitcoin tokens that are showing some movement on the blockchain.

Since the metric only counts unique coins, it means that if a token has been shifted on the network multiple times in a single day, its movement will still contribute only one unit toward the circulation indicator.

The reason the metric has this restriction is that a large number of the same coins move around a lot on the chain on any given day, with only a handful of investors being responsible for their movements. Many such transactions are relay transfers and other duplicate movements, which don’t actually have much relevance to the market.

Thus, if the indicator counted just the pure number of tokens being moved around, regardless of whether they were unique or not, an inaccurate picture regarding the chain activity may appear.

When the value of the circulation is high, it means a large number of unique tokens are seeing some transaction activity right now. Such a trend implies the blockchain is likely observing participation from a high amount of unique users.

Now, here is a chart that shows the trend in Bitcoin circulation, as well as in its 30-day moving average (MA), over the last year:

Looks like the value of the metric has been quite low in recent days | Source: Santiment on Twitter

As displayed in the above graph, the Bitcoin circulation has remained at relatively low levels for quite a while now. The 3AC collapse back in June 2022 and the FTX crash in November 2022 was the last couple of instances where the indicator hit some high values.

These surges in the metric weren’t unexpected, as crashes of this kind generally attract a large number of new users to the network (and wake up some dormant old ones), thus leading to a spike in the unique number of tokens being moved across wallets on the blockchain.

Just like crashes can force people to make some moves, rallies can also have a similar effect on the network. However, despite the fact that the current rally started back in January of this year, the Bitcoin circulation hasn’t shown any significant uptick so far.

According to the 30-day MA of the metric, coins are being moved at a rate of 105,000 per day, which is 56% less than the one-year highs seen back in June 2022.

“When looking for validation of mid/long term bull runs, utility should be rising,” explains Santiment. As the utility of the cryptocurrency hasn’t increased recently, it’s possible that the rally may run out of steam before long.

BTC Price

At the time of writing, Bitcoin is trading around $28,300, down 1% in the last week.

BTC has been moving sideways in the last few days | Source: BTCUSD on TradingView

Featured image from Maxim Hopman on Unsplash.com, charts from TradingView.com, Santiment.net

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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