The recent rise in the number of Bitcoin
wallets holding a non-zero balance of the cryptocurrency has reached a new
record high. This suggests that despite the bear market in 2022 and a
challenging global economic outlook for 2023, the adoption of the world's first
and largest cryptocurrency by market capitalization is still increasing. Data
presented by crypto analytics firm Glassnode showed that on January 8th, 2023,
the number of Bitcoin addresses with a non-zero balance rose above 43.8 million
for the first time, surpassing the previous record high of 43.76 million which
was reached in mid-November 2022.
Source: Galssnode Bitcoin New Addresses
The growth in the number of Bitcoin wallets
with a non-zero balance is a positive sign for the cryptocurrency. It indicates
that more and more people are acquiring and holding Bitcoin, leading to an
increase in the overall adoption of the digital currency. Despite the
challenges that the cryptocurrency market faced in 2022, the steady growth of
Bitcoin continues to show its resilience and potential for long-term success.
In November, the failure of FTX, a former
leading cryptocurrency exchange, led to a surge in self-custody of
cryptocurrencies. As customers lost access to billions in funds, investors
moved to secure their Bitcoin by keeping it off exchanges, causing a rise in
address numbers.
However, when Bitcoin's price dropped to new
lows in 2022 following the bankruptcy of FTX, many investors sold off their
Bitcoin, leading to a decrease in the number of non-zero addresses. This
decline was a result of investor panic and a belief that the cryptocurrency
market was unstable.
Recent events, including a 40% increase in the
price of Bitcoin since the start of 2023 and positive indications from on-chain
and technical analysis that the bear market has ended, have enticed new
investors back into the market. This has led to a new record high in the number
of non-zero Bitcoin wallet addresses, indicating a growing trust in the
cryptocurrency.
Glassnode data on Bitcoin wallet address groups
reveals that the recent increase in the number of non-zero addresses is
primarily driven by a surge in the number of wallets holding a small amount of
Bitcoin (BTC). The number of "Shrimp" wallets, which hold less than 1
BTC, reached a new record high of 42.827 million. In contrast, the number of
"Crab," "Fish," "Shark," and "Whale"
addresses, holding 1-10 BTC, 10-1K BTC, and over 1K BTC respectively, have
remained stagnant. Initially, the number of Crab, Fish, and Shark wallets had
increased during the dip in the price of Bitcoin after the FTX collapse, as
larger investors took advantage of the opportunity to buy.
The recent increase in non-zero Bitcoin wallet
address numbers suggests a shift in ownership from larger investors to smaller,
new investors. Large investors tend to fall under the category of HODLers, who
buy and hold onto their Bitcoin for a prolonged period due to their confidence
in the cryptocurrency's future.
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There is evidence that the Bitcoin market may
be at the start of a rotation from HODLers to new investors, which typically
occurs at the beginning of a new bull market for Bitcoin. This trend suggests
that the market may be entering a new period of growth and optimism for the
future of the cryptocurrency.
According to Glassnode, the Realized HODL Ratio
(RHODL) appears to be approaching a low point. RHODL measures the distribution
of wealth between experienced and new investors in the Bitcoin market by
comparing the number of coins that have not moved in 1-2 years to the number of
coins purchased in the past week.
The Realized HODL Ratio (RHODL) has seen a
recovery from its lowest point since the 2019 bear market in late December. As
shown in the chart, RHODL recoveries tend to coincide with an increase in the
Bitcoin price. The RHODL measures an increase in demand for Bitcoin from new
investors, and a greater participation in the market has historically resulted
in long-term price appreciation.
However, the rise in non-zero wallet addresses
does not necessarily indicate that the Bitcoin price will continue to go up.
Despite the slow increase in non-zero addresses throughout most of 2022, the
bear market still occurred. The demand from new investors who bought during
dips was not enough to prevent price decline due to the capitulation of
short-term investors, as shown by the rise in dominance of older coins in the
RHODL ratio.
For the rise in non-zero addresses to be
considered a bullish sign, it must also be accompanied by evidence of a shift
in Bitcoin wealth towards new investors. Currently, this appears to be
the case.
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