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The Daily Dive #079 — Float Supply, Halving Cycles, UTXO Distribution

The Daily Dive #079 — Float Supply, Halving Cycles, UTXO Distribution

Quantifying The Bitcoin Supply Shortage

When looking at the bitcoin supply it’s important to consider the state of the float supply, an estimation of the available bitcoin on the market for sale. One way to estimate the float is to look at short-term holder supply plus the supply balance on exchanges in total and as a percentage of circulating supply. If you were to add in long-term holder supply to these two, supply is nearly identical to circulating supply.

The current float supply is 5.52 million bitcoin worth $317 billion at today’s market price. But we know that any sizable bids to take the bitcoin float off the market may drive the price up, all else equal, increasing the USD market value with every new bid.

Source: Glassnode
Source: Glassnode

That float supply estimation is now at 29.31% of circulating supply which has fallen from 49% at the top of the 2018 cycle and 41% at the top of the March 2021 all-time highs. This is the lowest level of float supply in over the last 4 years since January 2017 when price went on to 21x in just 12 months.

Float supply also peaks with the bull cycle top nearing 50% as long-term holders flood the market with more bitcoin, taking profits. As price increases, we will see a similar activity to 2018 with float supply increasing as some long-term holders take profits moving bitcoin to short-term holders until buying is exhausted.

Source: Glassnode

Halving Cycle Multiples Show Upside

Many have used a cycle low multiple metric (current price / cycle low price) to understand where the current bitcoin cycle is relative to potential returns in previous cycles. As we close in on the 79 days left in Q4, everyone is waiting to see if history repeats itself and the potential upside plays out.

Source: Buy Bitcoin Worldwide

Another way to view this trend is to use halving price lows rather than cycle lows. This is using the minimum bitcoin price after the halving date in each cycle rather than using the cycle low prices pre-halving.

They tell the same story with bitcoin currently at a 6.67x multiple relative to the halving low price of $8,591 on May 11, 2020. At 700 days after the halvings, we’ve seen previous multiples settle out at 27x and 14x for the first and second halvings, respectively. We’re currently at 521 days and typically see multiples have a major peak well before cooling off. The idea of lengthening cycles has extended the time it takes for bitcoin to reach blow-off tops during bull markets.

Source: Coinmetrics

What we can take away from these price multiple charts is that if history repeats itself, we’re in for an exciting Q4 that could certainly extend into Q1 2021 at the least.

UTXO Distribution

Source: Glassnode

When evaluating on-chain volumes, it is clear that bitcoin is currently trading next to the last clear zone of volume before all-time highs. What does this mean? Bitcoin can and likely will move to all-time highs in a swift manner and directly afterwards enter price discovery mode.

Global FOMO will ensue on a level never before seen in bitcoin or broader crypto markets. Bitcoin’s parabolic price action against a macroeconomic backdrop with the highest inflation readings in decades is quite the narrative and it will likely spark a tidal wave of new capital to enter the market.

This is coming in due time. And when it does, you will be reminded that you do not hold enough bitcoin ​​— because no one does. Stack sats or someone else will.