Since the crypto market never sleeps, the only way we can keep a tab on the activity in the digital assets is by having access to reliable data to analyze various trends. And Chainalysis Market Intel does that. Before we move on to the topic of interest today, let’s take a snapshot of the market — Bitcoin again pierced the $40k barrier after three weeks, but quickly receded and is currently trading around $38,700. However, the second-largest crypto Ethereum has stolen the show in the past few weeks with its all-time highs — the recent one stands just above $1760.
Coming back to the Chainalysis research, Bitcoin and Ethereum inflows to exchanges have declined slightly, with 7-day average inflows below the 30-day average, reducing sell pressure. Although the Trade intensity in the broader crypto market has declined slightly, it remains a little elevated in BTC as compared to the past.
The metric in consideration today is free-float. In the legacy financial markets, the free-float of a company are the shares that can be publicly traded. But in the Cryptoverse, it refers to the digital assets that are likely to be available for public trading. More specifically, free-float in digital assets is the amount held by entities that send at least 25% of the assets they receive and that have held the assets for less than a year.
This applies to all traders, investors or digital exchanges that tend not to hold on to their digital assets. According to Chainalysis Market Intel, the free float of bitcoin is currently 2.4 million bitcoin, just 13% of the 18.6 million bitcoins mined to date — the lowest share of supply in bitcoin’s free float since 2014. As evident from the chart above, periods of price gains are usually preceded by a decline in BTC free-float. This basically suggests that BTC available to buy remains scarce despite record prices.
While we are on the topic of free-float, the bonus chart above (Figure 2) shows the current free float as a percentage of supply versus market cap for 28 cryptocurrencies — covering traditional core assets, stablecoins, privacy coins, utility tokens, and DeFi & Payments assets. This provides a snapshot of the relationship of free-float among various digital asset categories.
Looking towards the right, Stablecoins and DeFi & Payments have the greatest share of supply in the free float since they are actively traded and exchanged on various platforms with the exception of a few who have relatively smaller floats. On the extreme left are utility tokens & privacy coins, which have relatively low shares in the free float — yet to be used for their intended purpose, they are mostly held as a speculative asset.
And finally, traditional core assets like Bitcoin also have a relatively low free float, reflecting their use as investment assets. Ethereum has a relatively higher float in this category owing to its extensive use in the DeFi space. For the foreseeable future, it seems that Bitcoin’s diminishing free-float will continue to support the price at these levels.
Originally Published on Medium
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