On Dec. 17, 2017, bitcoin hit its highest level ever—$19,783. It was a stunning move for an asset that traded under $1,000 at the beginning of the year. The manic rally enticed everyone from high-tech disciples to grandparents.
It didn’t last long. And it hasn’t returned.
In the last week of November, with bitcoin trading at around $7,000, only about 14% of the 18 million bitcoins outstanding were actively traded, according to data from research firm Flipside Crypto. That is down from more than 50% in October 2018.
The energy that drove bitcoin and the cryptocurrency industry through much of the early years has been replaced by the sobering reality that creating new global monetary standards requires more than computer code.
“Nothing has hit escape velocity,” said Ryan Selkis, the founder of research firm Messari. Although bitcoin’s supporters are still optimistic, progress in the industry as a whole is “still largely invisible, at least from a narrative standpoint,” he said.
The market has been seeking bitcoin’s next big catalyst for two years. Initial coin offerings came and went. Investors then turned their focus to bitcoin exchange-traded funds, “decentralized apps” and “decentralized finance.”
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Now, hopes rest with institutional investors, and there have been signs of progress on this front.
launched its futures exchange, Bakkt, earlier this year with the ultimate goal of making cryptocurrencies sufficiently transparent and regulated for individuals to use in retail purchases.
Meanwhile, crypto exchange Coinbase has been seeing between $200 million and $400 million in deposits a week, Chief Executive Brian Armstrong said on Twitter in August.
Yet, the number of daily bitcoin transactions has been falling lately. Since the beginning of November, it has hovered around 307,000 transactions, according to data from Blockchain.com. That is down from 370,000 in the spring.
Bitcoin’s price has recovered from its December 2018 low of about $3,100. But as evidenced by the drop in active trading, it is driven by fewer investors.
About 9.1 million bitcoins, representing about 51% of those outstanding, haven’t changed hands in at least six months, according to Flipside. About two million of those bitcoin haven’t moved in more than two years.
On one level, that number isn’t surprising. A big theme in bitcoin circles is “hodl,” a misspelling of “hold.” Some proponents of bitcoin say they believe that the cryptocurrency is destined to rise, some day, and refuse to sell. Even in December 2017, during the bubble, the percentage of bitcoins that hadn’t traded in more than six months was about 40%.
Something that hasn’t changed between then and now: virtually all of the bitcoin outstanding is held by a relatively small number of people.
Currently, only about 8.5% of all bitcoin wallets—the online accounts used to store bitcoin—hold 99% of all the bitcoin in circulation. That is little changed from 6% in mid-2017.
There are about 44 million wallets online, according to data from Blockchain.com, meaning roughly 3.7 million wallets contain 99% of all bitcoin. The number of actual users is likely lower, since one person or entity can control more than one wallet.
It isn’t exactly clear how many of those wallets belong to exchanges, but that doesn’t change the bottom line that the vast majority of bitcoin is controlled by relatively few players.
“A lot of people are sitting at the moment,” said Eric Stone, the head of data science at Flipside. But that much bitcoin sitting idle is like kindling, he suggested. “It can be the precursor to dramatic shifts.”
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