Declining Bitcoin Holders: A Bullish Signal?

The number of Bitcoin wallet addresses holding BTC has been decreasing over the past month, which, according to onchain analytics firm Santiment, might actually be positive news for investors. On July 18, Santiment reported on X that the number of Bitcoin addresses with a balance of more than zero had dropped by 672,510 over the past month.

Santiment suggested that traders might believe the all-time high in March “was as good as it’s going to get in 2024.” However, the firm highlighted a potential silver lining, noting that a rebound often follows such sell-offs. They stated, “When we see mass liquidations like this, the probability of a continued rebound only increases.”

This decline in wallet addresses has mirrored Bitcoin’s price action, which has been trending downward since BTC last topped $70,000 in early June. Despite markets recovering to reclaim $65,000 this week, the chart has not shown a corresponding rebound in BTC holder numbers. Historically, increases in BTC holder numbers have lagged behind spot markets by several weeks.

At the current price, the percentage of Bitcoin supply in profit has dropped to 89.43%, according to Glassnode. This metric has fallen by 6.5% since mid-June when BTC prices were around the $70,000 level.

Other indicators paint a more bullish picture. CryptoQuant founder Ki Young Ju noted on July 18 that over-the-counter (OTC) markets are “overwhelming” centralized exchange markets, suggesting institutional accumulation. Whale wallets, holding more than a thousand coins, including spot ETFs and custodial wallets, added 1.45 million BTC this year, bringing their total to 1.8 million BTC, roughly 9% of the circulating supply.

Ju highlighted that the weekly total inflow to these whale entities is now higher than the total for 2021, exclaiming, “In 2021, about 70K BTC flowed in over the year; now, it’s 100K BTC weekly. I repeat. 100K BTC weekly.”

Meanwhile, trading volume on centralized crypto exchanges fell by 21.8% in June, marking the third consecutive month of declines, as reported by Cointelegraph. However, Bitcoin spot markets have shown resilience, gaining 12% over the past seven days, with prices hovering around $64,800 at the time of writing.

This analysis suggests that while short-term metrics show a decline, longer-term indicators and institutional activity might signal a bullish future for Bitcoin.