Less than 20% of the current supply of bitcoin is used for trading, says Chainalysis

Only 3.5 million bitcoins — around 19% of the total outstanding supply — are used for trading, according to a new report from blockchain analytics firm Chainalysis.

According to the report, nearly 18.6 million bitcoins have been mined as of June 2020, and the majority of this supply is being held long-term. 

Chainalysis found that approximately 60% of the current supply of bitcoin is held by parties that have never sold more than 25% of the bitcoin they’ve ever received. The firm categorized this supply as “held for long-term investment.” 

Another 20% of the current Bitcoin supply hasn’t been moved in five years or longer, what Chainalysis calls “lost Bitcoin.” 

The remaining fraction is used for trading, mainly between exchanges. This amount supplies the market and helps determine the price of bitcoin, Chainalysis said. 

The report suggested that bitcoin being held for long term investing could eventually end up being an important source of liquidity in the market as the cryptocurrency becomes more scarce. 

The report also found that throughout 2020, around 340,000 people were active Bitcoin traders on a weekly basis. Chainalysis put these traders into two categories: retail and professional. It categorized retail traders as those depositing Bitcoin worth less than $10,000 USD at a time. 

Retail transfers account for 96% of transfers sent to exchanges, the report said. Professional traders, on the other hand, accounted for much fewer weekly transfers in 2020, despite playing a larger role in controlling market liquidity.