Danger for Bitcoin’s course? – What the current on-chain data on BTC reveals

Anyone who has bet on the course of Bitcoin this year has not been disappointed. More and more investors from different asset classes are discovering the advantages of BTC for themselves. Fundamentally, we see that there is a significant increase in the number of people holding Bitcoin. What initially sounds very positive for the price may also turn out to be a danger.

Read more about what dangers lurk for the course of Bitcoin and how on-chain data can help in this analysis, with our companion app Born2Invest. Download our app for free and read the latest financial news from around the world.

What are the risks for the course of Bitcoin?

Since 2020, a continuous outflow of Bitcoin to exchanges could be observed. This means that more BTC is constantly flowing out of the exchanges than in. This is initially to be seen as positive, as it reduces the available supply of Bitcoin.

The short supply on the exchanges, in turn, has a price-driving effect on the course of Bitcoin. On the other hand, it may also cause confusion that – despite the price increases of BTC – Bitcoin is flowing away from the stock exchanges. Who does not hold its cryptocurrencies finally on the Exchanges, is safer on the way, but cannot trade them. Differently formulated: Owners cannot sell simply and participate in such a way in profits with the course of Bitcoin.

However, this HODLer mentality can also pose a threat to the course of Bitcoin.

When are profits realized?

Almost 5 million addresses (of investors in crypto) are currently in a profit zone between 5% and 25%. So far, so good. So where is the supposed danger that is interpreted as a threat to the price of Bitcoin?

In order to find the answer, one should consider the number of addresses that are over 100% in the profit zone. In other words: These are the addresses that have at least doubled their stakes in US dollars.

Is 100% growth in the rate of Bitcoin already a reason to sell?

This number increased strongly since the beginning of the year and lies now between 6 to 7 million addresses. Despite the strong HODL mentality, the question of realizing profits arises.

When will investors take their profits? – Is a doubling of the profit already sufficient? At this point, one should not only think of the “small” private investors, but especially of institutional investors.

If a large number of investors decide to take their profits with them, that can have a negative impact on the share price of Bitcoin. Here it is important to understand that we are talking about probabilities and possibilities. At the moment we do not see any indications of this.

Bitcoin is currently the eleventh largest currency in the world. BTC is therefore ahead of currencies such as the Australian dollar, the South Korean won or the Mexican peso. The two most important precious metals gold and silver occupy first and sixth place in this ranking, respectively. Many German companies seem downright small compared to the market capitalization of Bitcoins. With future positive price developments, Bitcoin dominance can improve even further.

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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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