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Daily Bitcoin On-Chain Snap #18

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Long-term Holders accumulated 13 times more BTC than was mined during Q3

The Long-term Holder Supply to Issuance Ratio helps gauge the magnitude of accumulation by long-term holders relative to the current coin issuance to miners. The ratio compares the 30-day change in LTH supply (blue) to the 30-day change in circulating supply (orange). Whereas the ratio in pink captures the multiple of monthly coin issuance that is being accumulated or distributed by LTHs. Per Glassnode, the ratio shows heavy distribution by LTHs during February 2021, as the metric reached 26.4x the number of mined coins. More importantly, since July, LTH accumulation has hovered around 13-15x issuance, signaling the number of coins taken out of circulation are significantly more than are being newly minted by miners.

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Futures Premium Rises alongside Institutional interest in Cash and Carry Arbitrage

The three-month annualised futures basis has meaningfully rebounded in October from the July lows, rallying up to 12.4% this week. For context, May-July was a particularly bearish period, where futures markets priced in only a 2% to 5% annualized premium three months out. Rising premiums in the future market relative to spot bodes well for the popular ‘cash and carry’ strategy that is generally employed by institutional investors. The cash and carry strategy is a market-neutral strategy that combines the purchase of a long position in the spot asset and the sale (short) of a position in a futures contract on that same underlying asset. The strategy seeks to exploit pricing inefficiencies between the spot and futures market to make riskless profits. As such, a blowout in the futures premium would exacerbate bitcoin’s supply scarcity given the historically low exchange reserves and continued HODLing behavior by long-term holders. Note the gradual increase in the futures premium during August 2020-April 2021 that coincided with a bull-run for bitcoin.

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