Bitcoin No Longer Electronic Cash? Circulation Drops To Lowest In 13 Years

Bitcoinist
Updated Jun 12, 2024 05:29
Mitrade
coverImg
Source: DepositPhotos

On-chain data suggests Bitcoin is no longer being used as electronic cash by its userbase as the token’s circulation has seen a steep drop.


Bitcoin ‘Velocity’ Has Plunged To Historical Lows Recently


As explained by CryptoQuant founder and CEO Ki Young Ju in a post on X, Bitcoin’s circulation has recently slowed down. The on-chain indicator of relevance here is “Velocity,” which keeps track of the rate at which the cryptocurrency’s tokens are circulating in the market.


When the value of this metric is high, the coins move around faster on the network. On the other hand, a low value implies tokens are still inside an address long before being transferred.


Below is a chart that shows how the Velocity of Bitcoin has changed throughout its history.

Bitcoin Velocity


As displayed in the above graph, the Bitcoin Velocity had been rising during the 2021 bull run and had observed a peak in the middle of the 2022 bear market. Following this top, though, the metric completely reversed its trend as it started sharply going down instead.


This drawdown continued until the last few months of 2023, and the indicator has been moving sideways since then. The chart shows that these low levels that the metric has recently been consolidating are the lowest in around 13 years.


This would mean the cryptocurrency’s circulation rate is the same as in 2011. Now, as for the significance of the recent trend, it may tell us how the current userbase of the cryptocurrency is looking at the asset.


Bitcoin was originally meant to be cash in electronic form that works peer-to-peer (P2P), without requiring any central entity at all. The fact that the BTC tokens are no longer being circulated would imply that they aren’t being used much for monetary transactions. As the CryptoQuant founder puts it,Despite Satoshi’s vision of “P2P Electronic Cash,” Bitcoin is primarily used as “Digital Gold,” with institutions holding it without frequent transactions.


It’s unclear whether the recent low Velocity is here to stay for BTC, given that the indicator did observe a rapid increase to high values just a few years back.


As the graph shows, the indicator has gone through cycles over the cryptocurrency’s history, shifting between highs and lows. Ju notes Bitcoin will see its velocity “peak someday when BTC is widely used for payments.”


BTC Price


Bitcoin has extended its latest decline as its price is now down to just $66,400. The cryptocurrency’s returns now stand at -8% since the $72,000 high registered on Friday.


Bitcoin Price Chart


* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

Do you find this article useful?
Related Articles
placeholder
Bitcoin Hasn’t Reached Bull Cycle Top Yet, Quant Explains WhyAccording to the trend in an on-chain indicator, an analyst has explained how Bitcoin may still need to reach the top of the current bull cycle.
Author  NewsBTC
According to the trend in an on-chain indicator, an analyst has explained how Bitcoin may still need to reach the top of the current bull cycle.
placeholder
Bitcoin Price Surges Past $63,000: The Key ReasonsAfter a decline to $53,600 last Friday, the Bitcoin price experienced a major recovery over the weekend, exceeding the $63,000 threshold today. This marks a massive 17% increase since last Friday,
Author  NewsBTC
After a decline to $53,600 last Friday, the Bitcoin price experienced a major recovery over the weekend, exceeding the $63,000 threshold today. This marks a massive 17% increase since last Friday,
placeholder
Biden's veto stands, banks unable to  provide custody services for cryptoUS House failed to muster a two-thirds vote to overturn President Biden's veto of Joint Resolution 109.
Author  FXStreet
US House failed to muster a two-thirds vote to overturn President Biden's veto of Joint Resolution 109.
placeholder
Bitcoin Approaching $60,000: Analyst Thinks BTC Is Ready To Fly, Here’s WhyBitcoin is plugging the bleed of last week, stabilizing at spot rates, but still stuck within a bearish formation. Unless there is a conclusive close, ideally above $60,000, sellers will still dominate price action in the short to medium term. Is Bitcoin Preparing To Race Higher? Amid this state of affairs, especially after last week’s […]
Author  Bitcoinist
Bitcoin is plugging the bleed of last week, stabilizing at spot rates, but still stuck within a bearish formation. Unless there is a conclusive close, ideally above $60,000, sellers will still dominate price action in the short to medium term. Is Bitcoin Preparing To Race Higher? Amid this state of affairs, especially after last week’s […]
placeholder
Bitcoin price today: steady at $57k amid Mt Gox fears, Ether up on ETF hopesInvesting.com-- Bitcoin price rose marginally from recent losses on Tuesday, although sentiment remained on edge over a potential spike in token supply, while Ether rose sharply amid speculation that a spot exchange-traded fund was close.
Author  Investing.com
Investing.com-- Bitcoin price rose marginally from recent losses on Tuesday, although sentiment remained on edge over a potential spike in token supply, while Ether rose sharply amid speculation that a spot exchange-traded fund was close.