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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.”
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.”
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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.
Bitcoin and volatility are two words that often go hand in hand. Volatility means that the price of an asset might change rapidly and unpredictably, especially, for the worse.
For Bitcoin, after the highs of the past two years, the past few months have been rough.
But to a trader, on-chain metrics can help navigate through the crypto winter.
Despite bears’ presence, Bitcoin, at press time, broke out of the $17-$24k trading channel as it traded at $25k on CoinMarketCap.
Undeniably, BTC has declined by 16% since the start of the year.
However, crypto’s cycles got less sharp with time as profit tops and loss bottoms didn’t quite follow a horizontal line, as per a CryptoQuant analyst.
The said analyst used the on-chain metric Net Unrealized Profit and Loss (NUPL) for reference to shed more light.
Herein, the value of the metric has surged up and turned positive. The graph marked the relevant zones of the trend for the Bitcoin NUPL indicator.
As one could see, these NUPL cycles got less volatile with time as the metric didn’t surpass the 0.75 greed mark as it did in previous cycles.
The last two bottoms also had to descend loss amounts. Just a while ago, the NUPL’s value sharply dropped off into negative and subsequently rebounded back up into positive values after forming a potential bottom.
However, this low was far from the conventional 0.4 mark.
In addition to this, the risk of a pronounced drop (unlike in the past) seems to have eased out as macroeconomic pressures subsided. Analytic firm Glassnode in a tweet shared the same narrative.
That said, Bitcoin’s ‘demand is still down as altcoins steal the thunder,’ Glassnode added.
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But it doesn’t mean that the prices couldn’t resurface above the shoreline.
Looking at the weighted average funding rate, one can assert that the short-term holders had congested the network, and a rebound could be in play. - ambcrypto
