Bitcoin’s monetary speed at its lowest since 2010
Bitcoin’s monetary speed at its lowest since 2010

Bitcoin’s monetary speed at its lowest since 2010

By Marco Cavicchioli - 29 Oct 2018

Chevron down

Analyst Willy Woo recently published a tweet with a graph showing that Bitcoin‘s monetary speed is now at its lowest point since September 2010, just over a year and a half after it was born.

At the time, Silk Road still had to start to increase its speed while Mt GOX had only existed for 2 months. Speculation had just begun.

bitcoins monetary speed

Monetary speed refers to the rate – or frequency – at which the currency is traded on average. When it is low it means that its owners prefer to keep it as a store of value and not use it to make payments. So, after the historic highs of 2017, bitcoin owners now seem much more inclined to treat it as an investment rather than as a means of payment.

The chart shared by Woo not only shows this new minimum peak in Bitcoin’s monetary speed, but also shows that it is well below that of the US dollar, considering both cash (ie the monetary supply M1), and deposits (ie the monetary supply M2).

Currently, the level of Bitcoin’s monetary speed would be around 0.5, while that of dollars (M2) would be more or less at 1.5 and that of dollars (M1) even higher than 5.

It’s no wonder that the speed of cash is very high since it is mainly used as a means of payment. And it is not even surprising that the M2 is significantly lower since it is normal that many deposits are primarily used as a store of value.

But the fact that Bitcoin’s deposit is significantly lower even than the latter suggests that it could be considered by many owners as a store of value.

It should be pointed out, however, that such measurements do not include the operations carried out within the exchanges or via Lightning Network: the former actually concern only financial speculation and the latter are still few. Therefore the absence of these two channels of exchange is not affecting the real use of Bitcoin as a means of payment.

The same Woo has commented saying that it will be difficult to trigger in the short term a new bullish phase on bitcoin without a significant increase in monetary speed.

Nevertheless, he adds: “We gotta be realistic in the medium term. Long-term however, Bitcoin is on the base of an adoption curve that will continue to drive one of the biggest bull runs in history“.

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded and the Facebook group" Bitcoin Italia (open and without scam) ".

We use cookies to make sure you can have the best experience on our site. If you continue to use this site we will assume that you are happy with it.