Active Supply (BTC)

Active Supply (BTC)

The "Active Supply" indicator for Bitcoin, also known as "Supply in Active Addresses," refers to the amount of bitcoins that have been moved or transacted within a specific period. This indicator is important because it provides insights into the behavior of Bitcoin holders, showing the amount of Bitcoin that is actively being used or traded, in contrast to Bitcoin that is merely being stored or "hodl" (a term used in the crypto community to describe the long-term holding of cryptocurrencies).

When analyzing Bitcoin's Active Supply, we can adjust the time frame to understand how holders are interacting with their coins over different time horizons. For example:

  • Lifetime Active Supply: Refers to all the Bitcoins that have ever been moved or used since their inception. This number can give an idea of the total Bitcoins that have ever been active.

  • 10-Year Active: Shows the amount of Bitcoin that has been moved or used in the last 10 years. A high number might indicate that old Bitcoins are becoming active again, which can have implications for the market.

  • 5-Year Active: Looking at the five-year period, we can see the behavior of medium-term holders. If many Bitcoins that haven't moved in the last 5 years suddenly become active, this might signal changes in market trends.

  • 4, 3, 2, 1-Year Active: These time intervals show the Active Supply in a short to medium term, offering a more granular view of what's happening in the market recently. Increases in 1-year Active Supply, for example, could indicate that new investors are moving their coins, possibly to sell or trade them.

Active Supply is a useful metric for understanding the liquidity of the Bitcoin market, the confidence of holders, and potential selling or buying pressures. Significant movements in Active Supply can precede spikes in Bitcoin price volatility, as they indicate a change in the amount of Bitcoin available for trading.

It's important to note that Active Supply does not account for the total amount of Bitcoin in existence, but rather the amount that is "active" in terms of transactions. Thus, even though the total supply of Bitcoin is fixed, the Active Supply can vary based on holder activity.