Bitcoin: Rally fails to change LTH strategy

• Bitcoin’s supply, held for more than a year, hit ATH for several age bands.
• A marked divergence was observed in the LTH and STH supply.

With the anticipated halving event due for April 2024 and optimism over spot Bitcoin [BTC] ETF approvals reaching a fever pitch, the next few months are shaping up to be exciting for investors.

These bullish catalysts have deterred experienced holders from letting go of their stashes and have made HODLing a viable option. As a result, Bitcoin’s liquid supply has shrunk considerably while the supply held in self-custodial wallets has increased.

Diamond hands resist temptations

This was particularly reflected in the long-term holders’ (LTH) strategy. A report by on-chain analytics firm Glassnode showed that Bitcoin’s supply held for more than a year had charged to all-time highs (ATH) for several age bands.

Source: Glassnode

Moreover, the supply held in wallets with a not-so-good track record of spending jumped to ATH of 15.4 BTC at the time of writing. The illiquid supply has grown steadily since the cycle lows of 2021 bull market.

In fact, nearly 1.7 million coins have been moved to illiquid wallets since May 2021.

Source: Glassnode

A similar conclusion was drawn after examining the Hodler Net Position Change indicator. Typically, when new coins are accumulated by long-term holders, the indicator is represented as positive and green.

As evident, the LTHs have steadily accumulated and held on to their stashes since the sell-offs induced by the FTX collapse last year.

Source: Glassnode

While coins were clearly aging, it was not just driven by whales or investors with huge chunks of supply. Cohorts with much smaller holdings also started to accumulate aggressively since late October.

Source: Glassnode

LTH and STH supply diverges

LTH’s unwillingness to liquidate their holdings caused the short-term holder (STH) supply to decline further. A marked divergence was observed in the LTH and STH supply, as shown below.

Typically, the supply patterns of the two user cohorts move in opposite directions. LTHs accumulate coins during a consolidating market and wait for a bull run to distribute their holdings. This manifested during the 2021 bull run.

Much of the supply was grabbed by newer entrants to the market, as evidenced by the spike in STH supply.

However, as the bear market dawned, the trajectory reversed. LTHs have increasingly capitalized on bouts of volatility to add to their stacks, while STH were happy to flip their coins for profits.

Source: Glassnode

The recent price rally to $35,000 resulted in a more noticeable shift in spending behavior of short-term holders. The readings from the Sell-Side Risk Ratio indicator revealed large profit-taking by investors who held BTCs for less than 155 days.

Source: Glassnode

On the other hand, LTH’s Sell-Side Risk Ratio sat at historical laws as per the report. Interestingly, the levels were similar to the ones seen during the 2016 and 2020 cycles. No prizes for guessing what followed thereafter!

Market remains optimistic

Meanhile, Bitcoin broke through the $35,000 yet again, spurring hopes of a more sustained northbound movement. At the time of writing, BTC was exchanging hands at $35,258.96, according to CoinMarketCap. 

In a quote to AMBCrypto, Shivam Thakral, CEO of Indian cryptocurrency exchange BuyUCoin, shared his views on the market, saying:

“The digital asset industry is ready for the next phase of responsible growth as the FTX trial has come to a close. The positive market sentiment is pointing towards healthy and sustainable growth in the coming weeks subject to macro-economic conditions.”

How much are 1,10,100 BTCs worth today?

Bitcoin’s Fear and Greed Index also matched the optimism. AMBCrypto also scrutinized Hyblock Capital’s data and found that the market has been in a state of greed over the last 10 days or so.

Generally, investors turn greedy in a rising market, resulting in increased buying pressure. Hence, there were strong chances of BTC ascending further.

Source: Hyblock Capital