Bitcoin Circulation Rate Remains Low, Why This Could Be Bad For Rally

On-chain data shows the Bitcoin circulation rate has continued to be low recently, something that may be bad news for the current BTC rally.

Bitcoin Circulation Has Remained Low Despite Recent Price Surge

According to data from the on-chain analytics firm Santiment, 105,000 BTC is moving per day currently. The relevant indicator here is the “circulation,” which measures the unique daily number of Bitcoin tokens that are showing some movement on the blockchain.

Since the metric only counts unique coins, it means that if a token has been shifted on the network multiple times in a single day, its movement will still contribute only one unit toward the circulation indicator.

The reason the metric has this restriction is that a large number of the same coins move around a lot on the chain on any given day, with only a handful of investors being responsible for their movements. Many such transactions are relay transfers and other duplicate movements, which don’t actually have much relevance to the market.

Thus, if the indicator counted just the pure number of tokens being moved around, regardless of whether they were unique or not, an inaccurate picture regarding the chain activity may appear.

When the value of the circulation is high, it means a large number of unique tokens are seeing some transaction activity right now. Such a trend implies the blockchain is likely observing participation from a high amount of unique users.

Now, here is a chart that shows the trend in Bitcoin circulation, as well as in its 30-day moving average (MA), over the last year:

As displayed in the above graph, the Bitcoin circulation has remained at relatively low levels for quite a while now. The 3AC collapse back in June 2022 and the FTX crash in November 2022 was the last couple of instances where the indicator hit some high values.

These surges in the metric weren’t unexpected, as crashes of this kind generally attract a large number of new users to the network (and wake up some dormant old ones), thus leading to a spike in the unique number of tokens being moved across wallets on the blockchain.

Just like crashes can force people to make some moves, rallies can also have a similar effect on the network. However, despite the fact that the current rally started back in January of this year, the Bitcoin circulation hasn’t shown any significant uptick so far.

According to the 30-day MA of the metric, coins are being moved at a rate of 105,000 per day, which is 56% less than the one-year highs seen back in June 2022.

“When looking for validation of mid/long term bull runs, utility should be rising,” explains Santiment. As the utility of the cryptocurrency hasn’t increased recently, it’s possible that the rally may run out of steam before long.

BTC Price

At the time of writing, Bitcoin is trading around $28,300, down 1% in the last week.