Bitcoin
Bitcoin is no longer electronic money? Circulation for at least 13 years
Network data suggests that Bitcoin is no longer being used as electronic money by its user base, as the token’s circulation has seen a sharp drop.
Bitcoin’s ‘velocity’ has dropped to all-time lows recently
As explained by CryptoQuant founder and CEO Ki Young Ju in a publish on X, Bitcoin circulation has slowed down recently. The network relevance indicator here is “Speed”, which monitors the rate at which cryptocurrency tokens are circulating in the market.
When the value of this metric is high, coins move faster on the network. On the other hand, a low value implies that the tokens are still within an address long before they are transferred.
Below is a graph that shows how Bitcoin’s velocity has changed throughout its history.
The value of the metric appears to have registered a rapid decline over the last couple of years | Source: @ki_young_ju on X
As shown in the chart above, Bitcoin’s velocity increased during the 2021 bull run and had observed a peak in the middle of the 2022 Bear Market. Following this top, however, the metric completely reversed its trend as it began to decline sharply.
This reduction continued until the last months of 2023, and the indicator has fluctuated since then. The graph shows that these low levels that the metric has been consolidating recently are the lowest in around 13 years.
This would mean that the circulation rate of the cryptocurrency is the same as it was in 2011. Now, as for the importance of the recent trend, it can tell us how the cryptocurrency’s current user base is looking at the asset.
Bitcoin was originally designed to be money in an electronic format that worked peer-to-peer (P2P), without requiring any central entity. The fact that BTC tokens are no longer circulating would imply that they are not being used much for monetary transactions. As the founder of CryptoQuant says,
Despite Satoshi’s vision of “P2P Electronic Money”, Bitcoin is primarily used as “Digital Gold”, with institutions holding it without frequent transactions.
It is unclear whether the recent slow velocity is here to stay for BTC, given that the indicator saw a rapid rise to high values just a few years ago.
As the chart shows, the indicator has gone through cycles throughout the cryptocurrency’s history, alternating between highs and lows. Ju notes that Bitcoin will see its speed “increase someday when BTC is widely used for payments.”
BTC Price
Bitcoin extended its latest decline as its price fell to just $66,400. Cryptocurrency returns are now at -8% from Friday’s high of $72,000.
Looks like the price of the asset has plunged over the past day | Source: BTCUSD on TradingView
Featured image by Dall-E, CryptoQuant.com, chart by TradingView.com