Bitcoin long-term holders, or LTHs, are the investors who are currently exhibiting the most profit-taking behavior and the least amount of trading activity in the crypto market, according to a recent report by Glassnode. Despite accounting for only 4% to 8% of the daily on-chain volume, LTHs have been responsible for up to 40% of profit-taking movements. This behavior is particularly pronounced during periods of rapid price appreciation, as LTHs tend to sell off their holdings during market euphoria.
The consistent profit-taking behavior of LTHs has a significant impact on market liquidity and price stability. During times of market excitement, LTHs tend to increase their selling activity, which can contribute to significant price swings and the cyclical nature of the market. Glassnode analysts have noted that the current price of Bitcoin is below the cost basis of both short-term and medium-term holders, which could potentially lead to a loss of investor confidence and deeper corrections if the price remains below certain levels for an extended period.
Interestingly, the behavior of short-term holders and medium-term holders can provide valuable insights into market trends. When the cost basis of short-term holders falls below that of medium-term holders, it signals a weakening demand side momentum and results in net capital outflows from Bitcoin. This pattern has been observed five times during previous bull cycles in 2017 and 2021, and it is currently in its fourth instance in the current cycle. This trend suggests that market dynamics are shifting as LTHs increase their distribution pressure near Bitcoin’s previous all-time high.
The current consolidation phase near Bitcoin’s previous all-time high is situated at the “equilibrium to euphoria boundary,” where the price typically experiences rapid appreciation followed by increased distribution pressure from LTHs. This could potentially lead to further price volatility and market corrections as LTHs seek to take profits during periods of market exuberance. Overall, the behavior of long-term holders plays a crucial role in shaping the price movements of Bitcoin and other cryptocurrencies, highlighting the importance of understanding their actions and motivations in predicting market trends.
