The number of long-term Bitcoin holders has been increasing rapidly since October 2019. The last time the level of “HODLing” rose this high, the price of BTC surged from $500 to $20,000.
The term “HODLing” refers to investing in Bitcoin with less intent of selling it in the near-term.
Investors who hold BTC for long periods of time mainly believe that Bitcoin could evolve into an established store of value over the next decade like gold.
The level of HODLing increased in the last two months to figures unseen since 2015 to 2016, when the price of Bitcoin was ranging in between merely $200 to $500.
Alistair Milne, chief investment officer at Altana Digital Currency Fund, said:
“What if I told you that the amount of Bitcoin held without moving for >12 months is on course to make new ATHs (>61%) and barely changed in the March COVID panic … These levels of HODL’ing were last seen when the price was $200-500 back in 2015/16.”
There are two possible reasons investors are increasingly investing in Bitcoin with a strong long-term outlook: the activation of the third block reward halving and improving mainstream perception of cryptocurrencies.
On May 11, 2020, the Bitcoin blockchain network saw its third halving in history.
Historically, halvings led the price of Bitcoin to see extended upsurges over a multi-year period.
The first and second halving of Bitcoin occurred in November 2012 and July 2016. At the time, Bitcoin was valued at $11 and $800 respectively.
The price of Bitcoin increased by around 6800% from 2012 to 2016 and 2000% from 2016 to 2020, over the next four years that followed the two halvings.
The historical significance of a Bitcoin halving coincides with a record high inflow of capital from institutional investors into the Bitcoin market in recent months.
In April 2020, the price of Bitcoin rebounded from $3,600 to over $9,000 within 45 days.
Subsequent to the recovery, Grayscale CEO Barry Silbert said the Grayscale Bitcoin Trust’s assets under management surpassed $3 billion.
The Grayscale Bitcoin Trust is a popular investment vehicle among institutions to gain exposure to Bitcoin without directly holding BTC, as an alternative to an exchange-traded fund (ETF).
In the first quarter of 2020, Grayscale saw around 88% of its investments come from institutional investors.
Whether Bitcoin will see a similar rally as seen in 2012 or 2016 in the next four years remains uncertain. There are variables that may affect the trend of BTC in the short-term such as geopolitical risks and volatility in the equities market.
But, historical data dating back to 2012 suggests Bitcoin’s long-term trajectory remains highly optimistic and investors anticipate a strong performance over the next five to ten years.