Bitcoin’s 2023 Chronicles: Huge Profits and Exchange Anomalies

So 2023 was a great year for Bitcoin. It’s as if Bitcoin woke up and decided to flex its muscles in a big way. We’re talking about a huge jump in value – over 140%. This is truly a huge deal! It’s not about beating traditional competitors like gold. This also leaves other cryptocurrencies in the rearview mirror. Let’s take a closer look at on-chain activity and exchange news, and gather clues to see what Bitcoin will look like next year.

Bitcoin’s Past Explosion

According to a report by Glassnode, we are witnessing a déjà vu about the downtrend and the time it takes to recover after all-time highs (ATHs) in the 2015-2017 and 2018-2022 Bitcoin cycles.

In the current cycle, Bitcoin has seen a drop in ATH of about -37%, which is very close to -42% from 2013-2017 and -39% from 2017-2021. Additionally, since the FTX low in November 2022, Bitcoin price has risen a solid +140%, the strongest one-year return compared to +119% from 2015-2018 and +128% from 2018-2022.

Exchange Activity: Bitcoin’s Transaction Paradox

Despite 2023 being a big year for Bitcoin, the number of transactions depositing funds on exchanges has surprisingly hit a multi-year low. But here’s the kicker: According to Glassnode data, on-chain transaction volume flowing into and out of exchanges jumped from $930 million to $3 billion, a massive 220% increase.

This discrepancy between small deposits and soaring trading volumes makes us curious. What’s driving the intense exchange activity if not individual investors? Meanwhile, the decline in deposit transactions could suggest that investors are becoming more cautious about entrusting their assets to exchanges due to security concerns or a desire for greater control over their funds. This is where the potential transition to non-custodial exchanges like StealthEX comes into play. With the FTX drama still fresh in everyone’s minds, it is no surprise that these platforms where you can store your private keys are becoming more and more popular.

The significant increase in on-chain transaction volume shows that trading and speculation are busier than ever. Although investors are reluctant to deposit funds, they appear to be actively trading and moving large amounts of money. According to Glassnode, this could be a sign of growing institutional interest, especially given that average deposit sizes on the exchange are approaching previous highs of $30,000 per deposit.

Moreover, the fact that exchange deposits as a share of all transactions has fallen from about 26% in May to 10% now, but when adjusted for inscriptions, the decline is more modest (about 20%) adds another layer to this story. . It is undeniable that dynamic changes are taking place in the blockchain space as new transaction types emerge and new players come into the limelight.

Cashing out short-term holders

Short term holders (STH) have been making smart moves lately, cashing out their Bitcoin investments at the right time. Glassnode has the statistics to prove it. The STH supply profit/loss ratio has been hovering above ~1 since January. This means that these seasoned traders have been pretty good at playing the ‘buy the dip’ game, a classic move in an uptrend. However, these STHs are moving huge amounts of coins to exchanges, and the gap between what they are paying and what they are selling for is quite large.

In the first week of December, when Bitcoin reached $44,200, STH jumped in to seize the moment to take profits. It’s as if they saw the wave coming and rode it all the way to shore, taking advantage of the demand liquidity. This activity briefly halted Bitcoin’s rally and demonstrated STH’s influence on the cryptocurrency price.

Conclusion: Bitcoin and Beyond

Well, here it is. Bitcoin’s 2023 story is a mix of triumphs, challenges, and plenty of excitement. In the digital world, Bitcoin has never lost our interest with a roller coaster ride of strong recoveries and declines that mirror historical patterns, and has even bounced back recently despite a few bumps in the road. The ebb and flow of STH’s play and unpredictable interactions weave a complex yet intriguing narrative. Whether you participate for the highs or lows, or simply out of curiosity, observing Bitcoin’s movements is undoubtedly something to watch.

This is a guest post by Maria Carola. The opinions expressed are solely personal and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.