Market Trends: Analyzing Long-Term Holder Activity in Crypto
When market participants observe that stock investors are liquidating their prized possessions, it typically signals a potential downturn. However, the narrative shifts dramatically in the cryptocurrency realm, where such selling behavior is often interpreted as a sign of bullish sentiment. Analysts have been studying historical patterns in the supply dynamics of long-term investors—specifically, wallets holding coins for a minimum of 155 days, or over five months.
Markus Thielen, founder of 10x Research, noted in a report shared with CoinDesk that, “Based on our analysis, sharp declines in long-term holder supply (represented by the purple line) have frequently coincided with significant rallies in Bitcoin (illustrated by the white line), particularly evident in Q1 and Q4 of 2024. As long as long-term holders persist in reducing their balances, Bitcoin remains vulnerable to a potential short squeeze to the upside.”
Currently, the total supply held by these long-term wallets has fallen to approximately 13 million BTC. According to the analytics firm Glassnode, more than 1 million BTC changed hands during the recent price surge above $100,000, as short-term traders eagerly acquired assets from long-term holders. “During the recent rally above $100K, 1.1 million BTC have shifted from long-term to short-term holders, indicating a significant inflow of demand that has absorbed this supply at prices exceeding $90K,” Glassnode highlighted in its weekly report.
It’s important to note that while long-term holders are indeed selling, the pace of their sales has notably slowed. This is reflected in the monthly rate of change in the long/short-term holder supply ratio, which indicates that the selling pressure is no longer as detrimental as it was earlier this month. This suggests a more cautious approach to selling among long-term holders.
Exchange Balance Trends
Furthermore, the total Bitcoin held in wallets affiliated with centralized exchanges has decreased to 2.7 million BTC, down from over 3 million just six months prior, according to Glassnode. The ongoing withdrawal of BTC from exchanges—which reduces the immediate availability of coins for quick transactions—is widely regarded as a bullish signal. However, the landscape has evolved since the introduction of spot ETFs in the U.S. about a year ago.
Glassnode observed, “While many interpret this as a supply shock resulting from a mass withdrawal of coins by individual investors, potentially putting upward pressure on prices, we believe that a significant portion of this decline is due to coins being reallocated into ETF wallets managed by custodians such as Coinbase.” In essence, these assets have transitioned into an ETF, which serves as a liquid investment vehicle that can be bought and sold with the same ease as actual cryptocurrencies.
Adjusting for the coins that have been transferred to alternative investment vehicles, Glassnode reports that the exchange balance remains over 3 million BTC.
