BTC Liquidity

[Yogee]

Glassnode released reports about transfer of ownership from retail investors to hodlers. I suspect majority of these so called hodlers are institutional investors. Are we happy that less and less bitcoins are on exchanges? As someone who is planning to sell BTC later on, maybe yes. How about as someone as a "purist" following what bitcoin was created for?

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[mk4]

Even as a person who isn't planning on really selling Bitcoin(unless I really need to), I'm still happy because this means that people in general are getting their funds out of exchanges and holding the funds in self-custody. As for institutional investors, most of them actually use custodial services like Gemini Trust, Coinbase Custody, and Grayscale Bitcoin Trust(GBTC).

As for the "bitcoin is only for payments" people, well, tough luck. Like it or not, people are going to use Bitcoin for whatever purpose they want; and this includes for-investment purposes and for parking money in the long-term to counter inflation.

For those curious: https://studio.glassnode.com/metrics?a=BTC&category=Supply&m=supply.LiquidChange

[witcher_sense]

As someone who is planning to sell BTC later on, maybe yes. How about as someone as a "purist" following what bitcoin was created for?

This narrative again. Bitcoin was designed to be something for payments, but folks today have confused everything and are using it as they see fit. How dare they? The inventor of the wheel didn't know his invention would be a part of modern automobiles. Instead, he naively thought it would be used exclusively in chariots. The man who discovered electricity couldn't envision his discovery to be used in modern personal computers. He thought people would light their houses at best. The man who found out that our world is built on atoms had no idea his discovery would result in the creation of the deadliest weapon. Likewise, Satoshi, despite his obvious genius, couldn't foresee everything, especially future use cases of his invention.

Are we happy that less and less bitcoins are on exchanges?

The decrease in the importance of exchanges will increase the number of free exchanges between individuals, which will result in the development of the bitcoin circular economy.

[Yogee]

.....
The decrease in the importance of exchanges will increase the number of free exchanges between individuals, which will result in the development of the bitcoin circular economy.

The thing is BTCs are landing on the hands of these financial institutions. We have read public statements that they are hoarding hundreds of thousands of bitcoin. There's probably a small percentage that are held by retail investors from the BTC leaving the exchanges.

Good points on bringing up the "inventor didn't foresee" angle and using other examples. Appreciate that.

[witcher_sense]

The thing is BTCs are landing on the hands of these financial institutions. We have read public statements that they are hoarding hundreds of thousands of bitcoin. There's probably a small percentage that are held by retail investors from the BTC leaving the exchanges.

Good points on bringing up the "inventor didn't foresee" angle and using other examples. Appreciate that.

At the first glance, your concern is well warranted. Given the fact that there are many (and the number of them is consistently growing as time goes by) institutional investors, big holders, oligarchs hoarding their bitcoins without willing to ever spend them, what will happen to the bitcoin economy? Since we are still living under the old fiat system, it is hard to foretell if the bitcoin economy will ever become a reality. If that ever happens, the new bitcoin economy will be similar to that based on the gold standard. The problem of hoarding under the gold standard is thoroughly described and explained by Murray Rothbard in his famous work "What has government done to our money?". You can download it for free on mises.org, but here is the main idea:

The critic of monetary freedom is not so easily silenced, however. There is, in particular, the ancient bugbear of “hoarding.” The image is conjured up of the selfish old miser who, perhaps irrationally, perhaps from evil motives, hoards up gold unused in his cellar or treasure trove—thereby stopping the flow of circulation and trade, causing depressions and other problems. Is hoarding really a menace?
In the first place, what has simply happened is an increased demand for money on the part of the miser. As a result, prices of goods fall, and the purchasing power of the gold-ounce rises. There has been no loss to society, which simply carries on with a lower active supply of more “powerful” gold ounces.

[...]

Economists err if they believe something is wrong when money is not in constant, active “circulation.” Money is only useful for exchange value, true, but it is not only useful at the actual moment of exchange. This truth has been often overlooked. Money is just as useful when lying “idle” in somebody's cash balance, even in a miser's “hoard.”11 For that money is being held now in wait for possible future exchange—it supplies to its owner, right now, the usefulness of permitting exchanges at any time—present or future—the owner might desire.

[...]

Let us assume the supply remains constant, say at 3,000 tons. Now, suppose, for whatever reason—perhaps growing apprehension—people's demand for cash balances increases. Surely, it is a positive social benefit to satisfy this demand. But how can it be satisfied when the total sum of cash must remain the same? Simply as follows: with people valuing cash balances more highly, the demand for money increases, and prices fall. As a result, the same total sum of cash balances now confers a higher “real” balance, i.e., it is higher in proportion to the prices of goods—to the work that money has to perform.

[...]

People will almost always say, if asked, that they want as much money as they can get! But what they really want is not more units of money—more gold ounces or “dollars”—but more effective units, i.e., greater command of goods and services bought by money. We have seen that society cannot satisfy its demand for more money by increasing its supply—for an increased supply will simply dilute the effectiveness of each ounce, and the money will be no more really plentiful than before. People's standard of living (except in the nonmonetary uses of gold) cannot increase by mining more gold. If people want more effective gold ounces in their cash balances, they can get them only through a fall in prices and a rise in the effectiveness of each ounce.

[NeuroticFish]

Are we happy that less and less bitcoins are on exchanges? As someone who is planning to sell BTC later on, maybe yes. How about as someone as a "purist" following what bitcoin was created for?

Actually I think that the purists will also be happy to see less Bitcoin at exchanges. You know, "not your keys, not your coins", although we may have just traded apples for oranges, in a way or another. But as long as they don't start some fractional reserve banking based on this we are good.

About "what it was created for", I beg to differ. During years the stronger currencies (especially USD) were used in many countries as investment against local currencies' inflation. Bitcoin is just the strongest currency now (and for some while still a great investment). This is so much visible only because of the finite supply of Bitcoin, but as long as there are still people working for Bitcoin and paying with Bitcoin we are still good.

[aoluain]

Personally, I wouldnt be selling Bitcoin anytime this year, not during a bull market.
We are primarily selling into the hands of Hodlers and its tricky if we would be able
to buy back at at least the same price as we sold at.

This reduces supply as everyone above agrees with.

Bitcoin has become more than a peer-to-peer payment system but hasnt lost that feature.

The inventor of the wheel didn't know his invention would be a part of modern automobiles. Instead, he naively thought it would be used exclusively in chariots. The man who discovered electricity couldn't envision his discovery to be used in modern personal computers. He thought people would light their houses at best. The man who found out that our world is built on atoms had no idea his discovery would result in the creation of the deadliest weapon. Likewise, Satoshi, despite his obvious genius, couldn't foresee everything, especially future use cases of his invention.

Brilliant!

[so98nn]

Even as a person who isn't planning on really selling Bitcoin(unless I really need to), I'm still happy because this means that people in general are getting their funds out of exchanges and holding the funds in self-custody. As for institutional investors, most of them actually use custodial services like Gemini Trust, Coinbase Custody, and Grayscale Bitcoin Trust(GBTC).

As for the "bitcoin is only for payments" people, well, tough luck. Like it or not, people are going to use Bitcoin for whatever purpose they want; and this includes for-investment purposes and for parking money in the long-term to counter inflation.

For those curious: https://studio.glassnode.com/metrics?a=BTC&category=Supply&m=supply.LiquidChange

They will use it only for investment purpose considering the BTC's high taker and maker fees while broadcasting the transaction over exchanges. Plus additional security issues are always on the line when you are holding big amount of BTC's. So it's completely natural that they are gong to have self custody. I mean personally I am just holding couple of thousand (yeah poor shit) but still I will hold it into my wallet but not over an exchange.

If crypto asset builds up in the services like Grayscale, Coinbase etc then note that we are looking at advance future of bitcoin. This is going to turn on the market capitalisation to upper hands thus making it secure place to invest. 

[Husires]

Grayscale started buying Bitcoin several months ago, the effect did not appear and start from the last two or three months,
what is happening now there will not be a direct rise, it will happen after several months, and then we may not link between the them.

Grayscale own 3% of all bitcoin circulation. alone will not change the price.

[Lucius]

Grayscale started buying Bitcoin several months ago, the effect did not appear and start from the last two or three months,
what is happening now there will not be a direct rise, it will happen after several months, and then we may not link between the them.
Grayscale own 3% of all bitcoin circulation. alone will not change the price.

Grayscale has been around since 2013, but interest in this way of investing in BTC has skyrocketed last year, especially after some large companies like MicroStrategy made their Bitcoin investments public. If I understood you correctly, you think that the fact that Grayscale owns about 3% of BTC's total supply has no effect on the price, I would not agree with that at all. Although 3% is a small number, the total amount of BTC that number represents currently stands at 630 000 BTC.

Are we happy that less and less bitcoins are on exchanges?

Yes and no, it depends on what angle we look at it from. On the one hand, it is positive if we are only focused on the growth of the price of BTC - because if the demand increases, and there are less and less BTCs available on exchanges, it will mean a higher price. But if we look at it from the angle of an ordinary small investor, he has actually been left in a very unenviable situation because he has probably sold, and is now waiting for the price to fall to invest again. But big investors did not get into the whole thing for the sake of short-term profit, it is in their interest for the price to be as stable as possible with occasional dips that they will certainly use to increase their BTC holdings.

In other words the rules of the game have changed, but some still play by the old rules - only this time the bulls have much sharper horns than 2-3 years ago.

[davis196]

Glassnode released reports about transfer of ownership from retail investors to hodlers. I suspect majority of these so called hodlers are institutional investors. Are we happy that less and less bitcoins are on exchanges? As someone who is planning to sell BTC later on, maybe yes. How about as someone as a "purist" following what bitcoin was created for?

Selling your Bitcoin later on has nothing to do with the amount of HODLers,who are keeping their Bitcoins on a cold wallet.Even if most of the BTC gets stored into cold wallets,there will be enough liquidity on the BTC market to fulfill all sell orders.I read somewhere that wallets like Trezor are implementing a p2p cryptocurrency trading exchange,so you will have the ability to sell your coins,even if they are inside a cold wallet.
Storing BTC in cold wallet doesn't necessarily mean that those Bitcoin will "sleep" there for years.

[hatshepsut93]

Coins are leaving exchanges for now, but as your chart shows, they will probably return at some point. So, there's no reason to be overly enthusiastic about, it's not like there's some awakening happening in the Bitcoin community where people realize that centralized exchanges are evil and Bitcoin was meant for peer-to-peer transactions only.

And this trend isn't even a good trading indicator, we're 25% down from the ATH while coins continue to move out of exchanges.

[mk4]

Panic selling from retail investors. The trend is of course in fact a good sign. As soon as panic selling stops, those sellers who want to buy again are going to be buying into a market that has a lot less coins in it than even just a month ago. Price will skyrocket as soon as panic selling stops. Expect February to be huge for Bitcoin price! $50k+ in February is extremely likely (assuming panic selling from retail market finishes up in the next couple weeks).

? ? ?

Glassnode's chart shows bitcoin(BTC) actually leaving exchanges, not fiat being withdrawn. So how is this panic selling if crap tons of bitcoin are actually being withdrawn from exchanges?

[mersal]

only 21 million of BTC??
There are only 21 million BTC or one day more will be created if the community decides? Because at the rate that news appears of loss of private keys and BTC out of circulation ...

There will be no more bitcoin to be mined after 21 million, and it's been said that satoshi is Holding 1 million bitcoins which is unmoved for the last 10 years and also there is a rough estimation that 3 to 4 million bitcoins were lost which actually bought when bitcoin was the price at single and double-digit and the holders lost their private keys or hard disk crash, still 17 million bitcoin will be in the circulation.

[Terrell]

Liquidity plays an important role in financial markets, because the more liquid the market, the more stable it is. Of course, bitcoin's liquidity dipped during the peak fall of the market but recovered much faster than liquidity in traditional markets.