Recent data from IntotheBlock reveals a notable surge in long-term Bitcoin holding, with approximately 80% of Bitcoin now resting in wallets that have weathered the test of time for over six months. This shift is seen as a strong signal of mounting confidence among BTC holders.
The IntoTheBlock weekly newsletter delves into BTC’s growing relevance within the unpredictable macroeconomic landscape, examining its potential as a “flight to quality” asset. This week, the evaluation centers around BTC’s position in light of the liquidity consequences stemming from a recent bond market crash and the cryptocurrency’s inherent scarcity dynamics.
One key indicator, Network Fees, which tallies the total fees spent on using a particular blockchain, indicates a decline in Bitcoin fees by 29%. This drop coincides with a decrease in daily transaction volumes.
The report also touches on Exchange Netflows, which measure the net inflow and outflow of specific cryptocurrencies to and from centralized exchanges. Both BTC and Ether saw $170 million in outflows this week, suggesting a surge in buying activity.
Bitcoin As A ‘Flight to Quality’
The “Flight to Quality” narrative gains momentum amid a significant sell-off in US bonds, with long-term bonds suffering the most, experiencing a nearly 20% decline in the last six months. The surge in bond yields, reaching 5% for 10-year yields, poses substantial challenges for the bond market.
The sell-off has led to unrealized losses amounting to hundreds of billions, particularly affecting financial institutions like Bank of America, which reported $131.6 billion in paper losses.
Concurrently, US debt continues to soar, climbing by $604 billion in the last month, exacerbating structural concerns as government debt and interest rates trend upwards.
BTC’s recent rally has been coined a “Flight to Quality” by Larry Fink, BlackRock’s CEO. Both Bitcoin and gold have shown a 7% increase in October, enhancing BTC’s allure as an alternative asset among Wall Street veterans. Impressively, not only is Bitcoin outperforming traditional assets but it’s also been less volatile than long-term US bonds, defying its reputation for extreme price fluctuations.
This favorable environment, coupled with the anticipated approval of a Bitcoin spot ETF, has buoyed Bitcoin’s price. Furthermore, long-term holders are reinforcing Bitcoin’s scarcity, with the upcoming halving set to reduce annual inflation from 1.72% to 0.86%.
The bond market’s ongoing tumult is exposing vulnerabilities in traditional finance. As bond prices decline, experts speculate that the Federal Reserve may need to intervene, potentially through quantitative easing, given persistently high inflation rates. Global liquidity may increase in this climate, making Bitcoin’s scarcity a desirable asset for investors seeking refuge in these uncertain times.