Expansion of short-term BTC holders suggests ‘final flush’ of sellers

August 16, 2022 Coin Telegraph

Short-term holders expanding their BTC holdings indicates that heavy sell-offs have taken place.

A recent spike in short-term BTC holders could signal a “final flush” of sellers, meaning the capitulation events have played out, leaving the market ready for months of accumulation.

The latest The Week On Chain report from market analysis firm Glassnode on Aug. 15 points out that short-term holders (STHs) have expanded their holdings by 330,000 BTC since May’s catastrophic LUNA collapse. As a result, they may be the canary in the coal mine signaling the path to market recovery.

During the mass sell offs starting in May through June, Short-term holders of Bitcoin (BTC) established a new trend by buying up extremely cheap coins at or below $20,000 which puts them in an “advantageous financial position.”

After a dramatic capitulation event, the ownership structure of #Bitcoin has been reshaped.

As markets sell-off, $BTC migrates from weaker hands, to those stepping in at the lows. Here, we explore how to track this migration of coins using age bands.https://t.co/xBxdvALRmZ
— glassnode (@glassnode) August 15, 2022

The report states that an outflow of about 200,000 coins from long-term holders (LTHs) and exchange net outflows since May appear to have been the main contributors to the swelling STH supply. Altogether, these events indicate that a capitulation has occurred and that STHs “stepped in during the flush out, and now own coins with a much lower cost basis.”

STHs are defined as wallets that have held BTC for no more than 154 days. They become LTH at 155 days.

Typically, STHs buy coins at or near all-time high prices and selling much lower as “extreme STH accumulation is normally concurrent with bull market topping formations.” However Glassnode stated that buyers from May and June created a “constructive divergence” in bucking that trend.

“Such events describe a transfer of coins to new buyers whom are initially classed as STHs, but have a low cost basis, but are in an advantageous financial position to HODL from there on," it added.

Glassnode suggests that the next aspect of a market turnaround that analysts must look at is whether the new STHs from May and June “have the conviction to hold on” and contribute to further price increases.

Recent Crypto Rally Not Convincing Enough To Call for New Bull Run Yet, Says Analytics Firm Glassnode

August 3, 2022 The Daily Hodl

Bitcoin network activity decline suggests longer bear market: Glassnode

August 2, 2022 Coin Telegraph

Bear Market

Although Bitcoin prices made a strong 15% recovery over the past week, metrics suggest more network demand would be needed to sustain further price increases.

With several on-chain metrics for Bitcoin (BTC) still in a bearish range, a continuation of the recent price recovery will require increased demand and fees spent over the network, says Glassnode.

The assessment of mediocre market growth over the past week came from blockchain analysis firm Glassnode in its latest The Week On Chain report on August 1.

In it, analysts pointed to sideways growth in transactional demand, active Bitcoin addresses remaining in “a well defined downward channel,” and lower network fees as reasons to temper investors’ excitement about the 15% spike in BTC price over the past week. However, BTC is currently down 2% over the past 24 hours trading below $23,000 to $22,899 according to CoinGecko.

#Bitcoin and #Ethereum have rallied strongly off the bottom, reaching above the Realized Price.

Attention now turns to whether this is a bear market rally, or whether the fundamentals are following through in support.

Read more in The Week On-chain https://t.co/taOkbeVlyv
— glassnode (@glassnode) August 1, 2022

The report begins by highlighting the characteristics of a bear market which includes a decline in on-chain activity and a rotation from speculative investors to long-term holders. It suggests that the Bitcoin network is still demonstrating each of those traits.

Glassnode wrote that a decline in network activity can be interpreted as a lack of new demand for the network from speculative traders over long-term holders (LTHs) and investors who have a high level of conviction in the network’s technology. The report states:

“With exception of a few activity spikes higher during major capitulation events, the current network activity suggests that there remains little influx of new demand as yet.”

In contrast to last week when a significant level of demand appeared to be established at the $20,000 level for BTC and creating a floor, the additional demand needed to sustain any further price increases is not observable. Glassnode refers to the steady decline in active addresses as a “low bear market demand profile” which has been in effect essentially since last December.

The analysis observed similarities between the current network demand pattern and the one established in the 2018-2019 period. Similar to the previous cycle, network demand dried up after the April 2021 all-time high in BTC price. There was a notable recovery in demand leading up to the following November as prices recovered to a new ATH.

However, since last November, demand has been on a downward trend, with a major spike down during the mass sell-offs in May.

“The Bitcoin network remains HODLer dominated, and as yet, there has not been any noteworthy return of new demand.”

Glassnode added that the poor demand from anyone other than dedicated Bitcoin enthusiasts is forcing network fees into “bear market territory.” Over the past week, daily fees amounted to just 13.4 BTC. By contrast, when prices reached ATH last April, daily network fees topped 200 BTC.

Assuming fee rates increase to any noteworthy degree, Glassnode suggests that it could mean demand is on the rise, helping to sustain further “constructive structural shift” in Bitcoin network activity.

“Whilst we have not seen a notable uptick in fees yet, keeping an eye on this metric is likely to be a signal of recovery.”

Analytics Firm Glassnode Says Worst of Bitcoin (BTC) Capitulation Could Be Over – But There’s a Catch

July 27, 2022 The Daily Hodl

‘Extreme demand’ for BTC at $20K creating new support levels: Glassnode

July 26, 2022 Coin Telegraph

‘Extreme demand’ for BTC at K creating new support levels: Glassnode

Coin Telegraph

The latest analysis by Glassnode suggests that the worst of the sell-offs could be concluded, but the market still needs time to recover.

“Extreme” demand at the $20,000 price point for Bitcoin (BTC) appears to have forced the coins back into the hands of investors who care less about price while creating a new realized price level.

In the latest The Week OnChain Newsletter published on Monday, Glassnode’s UkuriaOC pointed to “extreme demand” around the $20,000 region, noting that each psychological price level from $40,000 to $30,000 to $20,000 creates a new group of short-term holders (STHs).

The Glassnode analyst noted that much of the supply that new STHs bought during that drawdown has not been sold even though prices are significantly down. This may be due to less price-sensitive buyers or those who care more about Bitcoin fundamentals than investment gains, driving demand.

Between late April through June, the BTC price has fallen 55% from $40,000 to a low of about $18,100, according to CoinGecko.

Glassnode wrote that this suggests the newly-minted STHs are price insensitive buyers with more confidence in Bitcoin, adding that their conversion from a STH to a long-term holder (LTH), who does not sell for at least 155 days, would help confirm this:

“It would be constructive to see these STH held coins at the $40k-$50K level start to mature to LTH status over coming weeks, helping to bolster this argument.”

In this current bear market, confirmed LTHs have locked in nearly 400 days straight of yearly profitability, performing better than 30-day profitability.

This is nearly the same duration that LTHs experienced during the 2018 bear market. Glassnode wrote that this suggests losses are being locked in by LTHs which, if the previous argument holds, means that the new buyers have less price sensitivity than the cohort who sold, meaning they could become the newest group of LTHs.

Another point of note in the report is that “unprecedented forced selling” from crypto companies amid mass liquidations and bankruptcies created conditions ripe for a relief pump.

The report concludes by stating that while the “worst of the capitulation may be over,” BTC could remain in this low range for some time as the cost basis for new coin buyers has diverged below the realized price for only about 17 days straight. Previous bear cycles have endured low divergences between 248 and 575 days.

BTC has retreated 3.1% over the past 24 hours to trade at $21,146 at the time of writing.

Ethereum (ETH) Flying off Exchanges Amid Price Surge This Week, According to Crypto Analytics Firm Glassnode

July 22, 2022 The Daily Hodl

Bitcoin hodling activity resembles previous market bottoms: Glassnode

July 18, 2022 Coin Telegraph

Bear Market

Bitcoin’s price had just topped $21,000 at the time of writing — meaning around 45% of BTC holders have an “on-paper loss,” according to Glassnode.

The majority of Bitcoin has been “hodled” for at least three months in behavior bearing a striking resemblance to previous Bitcoin market bottoms, says blockchain analytics firm Glassnode.

In a July 16 tweet, Glassnode noted that more than 80% of the total U.S. dollar (USD)-denominated wealth invested in Bitcoin has not been touched for at least three months.

This signifies that the “majority of BTC coin supply is dormant” and that hodlers are “increasingly unwilling to spend at lower prices,” said the firm.

Over 80% of the total USD denominated wealth invested in #Bitcoin has been HODLed for at least 3-months.

This signifies that the majority of the $BTC coin supply is dormant, and HODLers are increasingly unwilling to spend at lower prices.

Live Chart: https://t.co/lRtBe69Phz pic.twitter.com/NIQzwkXQDv
— glassnode (@glassnode) July 16, 2022

Bitcoin’s price is $21,013 at the time of writing, down almost 70% from its all-time high of $69,044 in November 2021. The current price puts around 45% of Bitcoin holders with an on-paper loss, according to crypto intelligence firm IntoTheBlock.

According to the Glassnode chart, other times that saw similar levels of Bitcoin hodling were during the end of the bear markets of 2012, 2015, and 2018.

Last week, Coinbase's head of institutional research, David Duong, wrote in a July 12 report titled “The Elusive Bottom” that on-chain data suggests that recent BTC selling has been carried out “almost exclusively” by short-term speculators. Long-term BTC holders “have not been selling into the market weakness,” he added.

“These holders own a highly concentrated ~77% of the total supply, which is down slightly from 80% to start the year but still quite high,” he explained before adding:

“We see this is a positive sentiment indicator as we believe these holders are less likely to sell BTC during turbulent periods.”

Earlier in the month, Glassnode analysts noted that the Bitcoin market had seen an almost complete purge of “tourists,” noting that activity on the network is at levels concurrent with the deepest part of the bear market in 2018 and 2019.

Glassnode revealed that the number of active addresses and entities had seen a downtrend since November 2021, implying new and existing investors alike are not interacting with the network.

Additionally, the number of non-zero BTC addresses has reached an all-time high of 42,530,652, according to the firm.

Capitulation ongoing but markets not at the bottom yet: Glassnode

July 12, 2022 Coin Telegraph

capitulation

While many indicators suggest that the market bottom may be close, time will be the ultimate determinant, according to a new report from Glassnode.

Bitcoin wealth is being distributed from weak hands to strong hands due to ongoing capitulation from retail investors and miners, signaling that the bottom may be close.

The latest ‘The Week On-Chain’ report from blockchain analysis firm Glassnode on July 11 explains that market capitulations have been ongoing for about a month and that several other signals suggest bottom formations in Bitcoin prices.

However, Glassnode analysts wrote that the bear market “still requires an element of duration” as Long-Term Holders (LTH), who tend to have greater confidence in Bitcoin as a technology, increasingly bear the greatest unrealized losses.

“For a bear market to reach an ultimate floor, the share of coins held at a loss should transfer primarily to those who are the least sensitive to price, and with the highest conviction.”

They added that the market may need further “downside risk to fully test investor resolve, and enable the market to establish a resilient bottom.”

Unrealized losses are losses in the dollar value of a holder's position before selling.

Glassnode made this assessment based on the observation that in previous bear markets in 2015 and 2018, LTH held over 34% of the Bitcoin (BTC) supply that was in unrealized loss. The STH proportion accounted for just 3% to 4%.

Currently, Short-Term Holders (STH) are holding 16.2% of the coins in loss, while LTH are holding 28.5%. Coins are moving to new STH who aim to speculate on price but have less conviction about the asset, it added.

The proportion of LTH holding coins at a loss may still be too low.

This implies that as LTH scoop up more coins, they must have diamond hands, meaning they must not sell, for analysts to note a true market bottom. Cointelegraph echoed this idea acknowledging that Delphi Digital also believes that more time is required under current market conditions to call this the bottom.

Bitcoin miners selling coins is evidence that the market could be testing bottom ranges. Glassnode demonstrated that miners have sold 7,900 BTC since late May but have recently slowed spending to about 1,350 BTC per month.

Duration is again highlighted as a critical factor in determining where the market bottom could be. During the 2018-2019 bear market, miner capitulation took about four months to mark the bottom; they have only been selling in 2022 for about a month or two. Miners still hold about 66,900 BTC, so “the next quarter is likely to remain at risk of further distribution unless coin prices recover meaningfully,” the report concluded.

Overall, Glassnode noted that the market looks near the bottom, stating that it “has many hallmarks of the later stage of a bear market” but that investors should be aware that further pain could be in store.