The reactivation of dormant Bitcoin accounts has been quite common in recent times. Over 10 million bitcoins had lain in inactive Bitcoin addresses as of July 2020. In May 2020, Crystal analytics reported that close to 50 BTC mined on February 9, 2009, left an address created precisely a month after bitcoin mining started.
Bitcoin Addresses Holding Huge Amounts in Silence
On April 1 2020, close to 6,800 bitcoins were transferred from the Mt Gox cold wallet after staying dormant for close to 11 years. Again on February 1 2022, 94, 643.29 BTC believed to be stolen from Bitfinex were transferred to an unknown wallet in 23 transactions. After the transfer, the U.S. Department of Justice (DOJ) reported that they had seized the cache of 94,643.29 bitcoin from a couple based in New York.
Thousands of inactive (mostly stolen) inactive Bitcoins were activated in 2022, causing massive effects in the Bitcoin space. As an avid Bitcoin investor, it’s crucial to follow the movement of Bitcoins from old dormant wallets as such reactivations have several impacts on the market. Here’s an in-depth analysis of this subject.
Dormant Bitcoin Addresses
Dormant bitcoin addresses are essentially bitcoin addresses that haven’t recorded any outgoing transaction for a particular period, usually 5 years. As of July 2021, only 5% of the total number of all the dormant bitcoin addresses held 98.7% of the bitcoin amount accumulated within the dormant bitcoin addresses.
Above is a table showing the top five dormant bitcoin addresses by the amount of BTC they hold as of July 2022. The wallets have been inactive for five years, while the address 1FeexV6bAHb8ybZjqQMjJrcCrHGW9sb6uF had the largest bitcoin balance as of July 2022. The current balance is 79,957 BTC, with just 329 transactions in total.
Reasons for Bitcoin’s Address Inactivity
As per reports by Digital Asset Data (a FinTech company analyzing crypto data feeds), close to 10.7 million bitcoins haven’t moved in more than 12 months. Considering the total number of bitcoins in circulation is 18.14 million, only 60% of the coins remained dormant, with only 40% participating in price action since 2019. The percentage of bitcoins lying dormant in Bitcoin addresses has been at the highest level since early 2017. The possible reasons for Bitcoin addresses inactivity include:
- HODLing– Long-term holding is one primary reason why a growing number of bitcoin addresses are lying idle. Following the enormous crush on crypto prices, most institutional investors are still holding on to their coins with the hope that the prices will soar in the coming years.
- Inaccessible Funds– Dormant Bitcoin addresses could mean that the funds are inaccessible either through the loss of private keys or loss of the physical wallet, usually in the form of a computer drive.
- Stolen Coins– Stolen BTC, usually due to hacking, are held in dormant accounts to prevent any investigations. For instance, 80,000 BTC previously stolen from Mt.Gox and Bitfinex were transferred to an unknown bitcoin address and held there for 11 years until the hacking story fizzled out of the limelight.
Sources of BTC in Old Dormant Wallets
According to a study by Crystal Blockchain, the major source of BTC in old dormant wallets is miner & mined coins at 54%. Other major sources include Exchange Services (20%), Online Wallets (12%), Darknet Marketplaces (4%), Gambling (2%), and the rest from mixers, stolen coins, online marketplaces, ATMs, payment processors, and more.
During the early years of Bitcoin, the dormant addresses mainly received funds from miners, and online wallet transfers accounted for close to 99.9% of the total. However, by 2017, nearly 60% of the funds received by dormant bitcoin addresses were from mixers and darknet marketplaces. Most of these coins were stolen from hacked exchanges and then passed through mixers to conceal the identity of the sources before being stored in dormant wallets. This is the main reason for the unprecedented growth of Bitcoin mixers as more and more individuals were looking to hide the source of funds in their wallets.
Why are Old Dormant Bitcoin Wallets Coming Back to Life?
The first half of 2022 witnessed several old dormant BTC wallets with up to 2,200 bitcoins returning to life. The frenzy has caused the Bitcoin market to be increasingly volatile. While there could be several reasons why these dormant Bitcoin wallets have sprung to life in recent days, speculation suggests the stolen bitcoins stashed in these wallets are now back in circulation after the stories died from the limelight or the victims gave up on following the hacking issues.
Another probable reason could be that the keys or hard drives to these old dormant bitcoin wallets were lost until they were found. However, such situations are infrequent, considering that most people never recover lost wallets unless with the help of high-tech firms.
Another reason could be that a particular country or world’s varied political or economic situation could have forced wallet holders into activities. Perhaps a country could have announced.
Why Is It Important to Follow the Movement of Bitcoins from Old Dormant Wallets
For any Bitcoin investor, it’s crucial to keep up to date with the movement of bitcoins from old dormant wallets for several reasons. To begin with, the reactivation of old dormant wallets dramatically influences the price of BTC. Bitcoin follows the simple law of supply and demand, which greatly affects its prices. Since Bitcoin’s supply is capped at 21 million BTC, holding coins in dormant wallets lowers their supply and increases the market price depending on the demand.
The reactivation of old dormant Bitcoin wallets has an immense impact on the BTC market trends. More often than not, the movement of bitcoin from old inactive wallets occurs during a bullish run for the owners to maximize profit. However, selling such vast amounts of bitcoin at an instance creates a “sell wall” effect which causes intense volatility resulting in market instability and a general reduction of the market price. This sell-off often hits small-scale traders as they are caught unaware resulting in unprecedented losses.
Therefore, you should always keep tabs on the movement of bitcoins from old dormant wallets as part of your market analysis and prevent being caught unaware. One way you can do this is by following Whale Alert crypto service updates. The site analyzes huge cryptocurrency transactions and offers updates via its Twitter account.
Activation of old dormant Bitcoin wallets has become pretty rampant in the Bitcoin space. This activation could result from regained lost keys or hard drives, stolen coins being reverted to circulation, and when owners decide to let go of the coins they had been holding for a long time.
The activation of old dormant Bitcoin wallets causes an enormous impact on the BTC markets, often triggering a “sell wall” effect which causes immense volatility. Most Bitcoin traders are often caught off-guard, leading to unprecedented losses. To avert such issues and formulate influential market trends, you’ll want always to keep tabs on the movement of Bitcoins from old dormant wallets. Plenty of crypto platforms offer such updates, and you won’t struggle to find one.