Kraken Intelligence: ‘Shocktober’ was a HODLers Paradise

Kraken’s research arm finds that October’s pricing rally was driven by supply shock from a massive effort to HODL bitcoin from miners to whales.

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Blockworks exclusive Art by Axel Rangel

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key takeaways

  • Kraken’s research finds that we are in a HODLing period, which led to a price rally in October. But these HODLers are relatively new to the game
  • Data also shows that mining pool operators are HODLing onto their proceeds as they appear to be ultra-bullish about market sentiment

An ‘End of Summer Sale’ which saw HODLers, both old and new, double down on their bitcoin portfolios created a supply shock in October which led to the bitcoin bull market and double-digit percentage gains in price says Kraken Intelligence in a new report called ‘Shocktober’. 

“Both large-scale entities and smaller players, who secure the network via mining pools, appear to be stockpiling bitcoin,” said Pete Humiston, Manager at Kraken Intelligence, in an email to Blockworks. “We’ve seen publicly-listed mining companies, like Argo Blockchain, use bitcoin as collateral in order to secure fresh funding for further capital investment. Meanwhile, smaller players could be selling into the bitcoin rally to fund the purchase and upkeep of ASIC mining rigs.”

According to Kraken’s data, the number of bitcoins that haven’t moved in the past six months has hit a 3-year low of 25%, which would appear to suggest that long-term HODLers have held through both the soft market of September and early October’s relatively strong market. 

“The China crackdown on mining entities resolved a longstanding industry concern about the over centralization of mining power in a country whose government had no great love for bitcoin,” Humiston continued in an email to Blockworks. “The exodus to North America and neighboring Kazakhstan has ultimately helped to distribute the Bitcoin network. We can not only interpret the recent surge in Bitcoin mining investment as a further signal of rebounding confidence in the crypto asset space, but also argue that a resilient mining sector reinforces the network’s overall resilience, vis-à-vis, the primary value proposition of Bitcoin itself.”

Kraken also found that the supply of bitcoin being held by mining pools (what it calls 0-hop coins) has increased by 50% from $74.1B to $109.5B. 

“Healthy network activity, coupled with solid long-term holding conviction, institutional miner demand, and rising prices, provides strong confirmation of the trend and highlights strong demand for BTC,” Kraken wrote. 

New whales in the crypto sea 

Given the return to a bull market, Kraken found that the number of whales has also increased accordingly. According to its count, the total number of whales has hit 16,116, the highest since May when bitcoin was trading approximately 34% lower than current levels. 

“Renewed demand for bitcoin is increasingly clear when looking at active addresses, new addresses, transaction count, and velocity,” Kraken wrote. “Data indicates that much of this jump in network activity is attributable to BTC ‘whales.’”

The weekly average of holdings of whales rose by 0.17% since early October to an all-time high of $745.5 billion after falling -0.1% with last month’s market pullback, the report reads. The authors argue that this means whales have grown increasingly more confident and are still in accumulation mode rather than switching to take profit.

“Long-term holders were unfazed by the retracement last month and used it as an opportunity to continue accumulating, this trend has not changed despite a significant rebound in price to new all-time highs near $67,000,” Kraken wrote while noting that smaller traders do not seem to be behind the latest push and have taken a step back to the whales.

The price of bitcoin opened the US Thursday trading day at $61,700, up/down 4.5% on-day, according to CoinGecko data.

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