Cryptocurrency

Only 3.5 million of Bitcoin are used in trading

We all know how it works Bitcoin. And that is, the first criptomoneda of the world was designed to limit the number of tokens that can exist ever. So you will only be able to minarse up to a total of 21 million BTC. However, and although to day of today have already been mined more than 18 million of Bitcoins, a study conducted by the firm Chainalysis would show that only 3.5 million of Bitcoin are used in trading.

The limit of Bitcoin

The limit on the number of Bitcoin that can exist is probably the best-known feature of the criptomoneda. Then, when Satoshi Nakamoto designed the virtual currency eleven years ago, he did so with the goal in mind of avoiding a crisis of inflation. Being the best means to achieve this, set a limit on its issuance.

So, Bitcoin would try to emulate the dynamics of the gold in the world market. As, one of the fundamentals in the value of gold, in its capacity as asset book value, is the limited supply of the precious metal. With an increase in the amount of gold that exists on the planet of less than 2% per year.

This growth is well below the average increase in the liquidity of fiat money. Which is subject to the discretion of States, which can increase or decrease the quantity of money in circulation to achieve their objectives. Even if that ends up damaging the population as in the cases of hyperinflation, among which Venezuela is only the latest example.

For this reason, and to avoid this, Satoshi Nakamoto set the number of Bitcoin that ever will come into existence in 20.999.999,9796 BTC. A figure that is usually rounded off to 21 million, and that represents the best insurance against inflation that can have the criptomoneda. Avoiding an excess in the supply of the same affect its value.

There are more than 3.5 million of BTC in the market of trading

However, the fact that there are around 18.6 million Bitcoin currently in circulation, it does not mean that all of them are in the market. In fact, only a small fraction of Bitcoins issued are traded regularly in the market of cryptocurrencies.

And is that, according to a report recently published by Chainalysis, close to 60% of the BTC that exist are in the hands of large financial institutions (whether investment firms or individuals), who have never come to sell more than 25% of the total number of Bitcoins they have.

Adding to another 20% of the total BTC that have not even been moved in the past 5 years, and are qualified by Chainalysis as Bitcoins are lost.

Only 3.5 million of Bitcoin are used in trading. Source: Chainalysis

That would leave only about 3.5 million of Bitcoin used in the exchanges for trading. Estimated that currently some 340,000 people are involved in the trading of Bitcoin each week. Being in a 96% traders retailers with less than 100,000 BTC in their accounts.

“The data show that the majority of Bitcoin is in the hands of those who treat it as digital gold: an asset that must be maintained in the long term (…) But this digital gold is supported by an active market of trading for those who prefer to buy and sell often“. Comments Chainalysis in the report.

In this way, the millions of Bitcoin currently off-market trading, to become a significant source of potential liquidity. Especially after the slowdown in the rate of increase of the money supply of BTC from the third Halving of Bitcoin.

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About the author

Belinda Carey

Belinda Carey

A finance girl by education, Belinda has been drawn to cryptocurrencies ever since Bitcoin first emerged in the 2009. Nearly a decade later, Belinda is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies.

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