A noteworthy trend is emerging in the Bitcoin market, as a substantial portion of its supply is transitioning into the hands of Long-Term Holders (LTHs), even amidst recent market turbulence and a decline in speculative activity. This shift is particularly striking, considering the current market conditions. After Bitcoin reached its all-time high of $73,000 in March, investors endured a period of sideways price movement, testing the confidence of new entrants. Despite this uncertainty, a considerable number of investors have opted to maintain their positions, potentially indicating a strong belief in Bitcoin’s long-term value proposition.
On-chain data reveals that Short-Term Holders (STHs), defined as those holding coins for less than 155 days, have incurred losses since early July. However, a crucial development is highlighted by the data: the supply held by STHs is increasingly close to migrating into LTH status, signifying a reduced likelihood of these coins being spent in the near future. Coins aged 3-6 months currently comprise over 12.5% of the circulating supply, a structure reminiscent of the mid-2021 sell-off and the peak of the 2018 bear market. Importantly, over 480,000 BTC acquired above the current spot price are now classified as LTH supply, indicating that a significant portion of long-term holders are currently at an unrealized loss but choosing to hold their positions.
This trend of LTH accumulation points to a broader shift towards market equilibrium and reduced speculative activity. Net capital inflows into the Bitcoin asset have begun to slow down, suggesting a balance between investors taking profits and those realizing losses. The decline in speculative trading, particularly in the perpetual swap markets, further supports this narrative. Liquidation volumes have significantly decreased in recent months, suggesting a diminished appetite for speculation and a transition towards a more spot-dominated market environment. This decline in speculation is further evidenced by the ratio between price and net liquidation volume volatility, which is approaching levels not seen since February 2022. Traders are becoming increasingly risk-averse, indicating a substantial reset in speculative interest.
Despite the current calm market structure, investors should remain vigilant, as such periods are often short-lived and can precede heightened volatility. Understanding these complex market dynamics is crucial for investors and industry professionals alike. For insights into the future of digital assets, Benzinga’s Future of Digital Assets event on November 19 presents a timely opportunity for exploration and discussion.
