It should be noted that the cryptocurrency market is not behaving in the best way right now. In particular, Bitcoin the day before managed to update the local bottom at $42,430 and traditionally pulled the rest of the market with it.


Bitcoin’s hourly chart

Other cryptocurrencies from the top of the coin ranking in terms of market capitalization also showed a serious dip. The record holders here are Polkadot, Solana and Ethereum, which have all slipped by 12.8 per cent, 12.4 per cent and 11.8 per cent over the course of the day.

Sagging of top cryptocurrencies on a daily and weekly basis

What will happen to Bitcoin?

Based on a recent Glassnode study, only 24 per cent of bitcoins can be considered liquid. These are the coins that are on wallets with a history of regular withdrawals. Accordingly, the other coins are on addresses that are considered hoarding. Here’s a rejoinder from the experts, in which they shared their view of what’s happening.

We can observe that by the end of 2021, even though the crypto market has corrected, there has been an acceleration in the growth of illiquid coins.

In other words, Bitcoin's current behaviour has not caused cryptocurrency owners to drive their coins onto exchanges en masse for the sake of selling them. At least that is the conclusion that can be drawn from these statistics.

Dynamics of liquid and illiquid bitcoins in circulation

As noted by Cointelegraph, this indicates that more and more investors are moving BTCs to cold storage wallets for long-term storage. At the same time, there are fewer people willing to sell bitcoins in the market, meaning that when demand increases, there will be a rapid increase in the cryptocurrency’s price. In addition, this trend coincides with a drop in cryptocurrency exchanges’ reserves.


As a reminder, cold wallets or vaults are special devices that hold private keys to a specific address outside the internet. Thanks to that hackers can't get to them and the assets will be safe. An example of such a device is the Ledger Nano S wallet, which we have already met separately.


Unfortunately, the uncertainty in the market could last for some time. The reason is another postponement by the US Securities and Exchange Commission (SEC) of NYDIG’s Bitcoin-ETF application. Previously, the regulator was supposed to announce the final decision on the new investment product by 15 January, but now the final review date has been pushed back to 16 March.

SEC

NYDIG’s Bitcoin ETF is spot traded, meaning it is based on the current price of the cryptocurrency in spot trading – and there is no such investment instrument on the US market yet. As a reminder, the US Securities and Exchange Commission approved several ETFs for the major cryptocurrency in 2021, but all of them are based on Bitcoin futures. Accordingly, this allows traders to speculate on the value of the underlying asset in the future rather than being tied to its current state.


We believe that sooner or later the massive withdrawal of bitcoins from trading platforms will make its mark. Still, the demand for cryptocurrency is not getting lower, but there are fewer coins in the public domain. This means that one day the value of the asset should surely increase markedly.


For even more interesting things about the crypto market, check out our millionaires’ cryptochat. There we will talk about other topics related to blockchain and decentralisation.