The Bitcoin market had a surprisingly volatile weekend, in contrast to the usual quiet price action shown in previous weekends. On Saturday, January 31st, the world’s leading cryptocurrency seems to be leading other crypto assets to the south of the charts, with its price dropping from $84,350 to less than $75,000 in a single swing.
As this happened, the opposite relative change also played out at the bottom of the charts. A recent on-chain test revealed that the behavior of Bitcoin’s Long-term Holder is changing, as opposed to that of its short-term holders.
Long-Term Holders Accumulate As Short-Term Supply Declines
Anonymous on-chain analyst Darkfost recently took on CryptoQuant, via a Quicktake post, revealing that long-term Bitcoin holders are accumulating more BTC. A relevant reference here is the LTH supply change (Coinbase fix).
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In context, this metric tracks the change in the total amount of Bitcoin held by long-term holders (typically coins that haven’t been moved ~ 155 days). According to the analyst, about 186,000 (on a monthly basis) was added to the supply of long-term owners.
Seeing as many coins have expired in the past 155 days, Darkfost suggested that the short-term holder supply, too, is witnessing a strong contraction. Notably, the analyst pointed out that this kind of transition (between long-term and short-term investors) last happened in April, as the price of Bitcoin reversed.
As can be seen intuitively, the growing supply of LTH is often interpreted as a growing belief among long-term Bitcoin investors. Additionally, this means that long-term holders are distributing less of their holdings and putting more away.
In theory, this behavior is bullish news for cryptocurrency. This is because, as LTHs draw in supply, the amount of Bitcoin available for sale decreases. Historically, it is also a bullish signal for the price of BTC, as it often appears during the early stages of accumulation periods or late in correction stages.
However, the results of the broader market in the current situation may not be so good. Darkfost emphasized that there is very weak demand available to limit the downward BTC price.
At the same time, the Bitcoin market seems to be entering a bearish phase; therefore, it is not far-fetched to see major capitulation events in the near future. If this happens, the price of Bitcoin may fall, as weak investors may sell their assets out of fear or as victims of liquidation events.
For the bullish view to be truly significant, there must be a clear recovery in demand, and continued long-term accumulation of owners.
Bitcoin Price At A Glance
As of press time, the price of Bitcoin stands at around $78,060, representing a loss of 6.9% over the past day.
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Featured image from iStock, chart from TradingView
