Bitcoin has been up 30% since the start of the year besides the negative influence of COVID-19. The major case narrative is that Bitcoin is a hedge against inflation caused by surplus printing on the part of central banks. A new report finds that professional traders are few in numbers, but they control the BTC markets.
According to the report by crypto data firm Chainalysis, “most bitcoin is held for long term investment.” The research team of the firm also reports that pro players in the crypto markets manipulate the liquidity though they are few.
Chainalysis divides the total mined 18.6 million BTC into three baskets depending on the movement of BTC to date. Per the report, 60% of all mined Bitcoins are held for long-term investments, which have not moved for many years. While 20% is considered lost as no activity has been detected in five years or longer. Remaining 19% (3.5 million) is used in trading, which moves between the crypto exchanges.
Professional Traders Control Market Liquidity
The traders who are responsible for trading these 3.5 million BTC are further categorized into professional and retail. Retail traders are those who usually deposit or transfer less than $10k worth of BTC, and they are responsible for 96% of all transfers based on an average weekly basis sent to cryptocurrency exchanges.
On the other hand, professional traders are significant players in the market which drive and give direction to the market. The Chainalysis’s said:
“Professional traders, however, control the liquidity of the market, accounting for 85% of all the USD value of Bitcoin value sent to exchanges. Because of this, professional traders are the most significant contributors to large market movements, such as those seen during Bitcoin’s dramatic price decline in March as the Covid-19 crisis intensified in North America. However, professional traders are few in number, moving all that value in just 39,000 transfers per week on average in 2020.”
The recent reports show a significant increase in the institutional interest in Bitcoin markets. For instance, Grayscale’s investors are buying BTC more than the new-minted supply of BTC.