Bitcoin on-chain data highlights steps BTC is taking to exit bear market

Bitcoin on-chain data highlights steps BTC is taking to exit bear market

Glassnode’s latest analysis suggests that Bitcoin has built a strong foundation below the $30,000 level, and the current supply structure shows similarities to early 2016 and early 2019.

The report shows that the Long-Term Holder (LTH) supply is just shy of a new all-time high with a total supply balance of 14.161 million BTC. In contrast, short-term holders (STH), who acquired coins after FTX failed, have seen the supply balance of 2.914 million BTC remain relatively constant in 2023.

Long-term owners are unaffected despite major downturns

By April 12, 155 days had passed since the FTX exchange collapsed on November 8, 2022. The 155-day mark is crucial because it is the minimum amount of time a Bitcoin holder must have held their coins to be classified as a long-term holder (LTH) .

Thus, the supply distribution can be split into two halves, first, before FTX’s collapse to represent LTH supply and the second after, to represent short-term holders.

Bitcoin long/short holder supply. Source: glassnode

The report also made a comparison of previous market cycles based on LTH behavior expressed via changes in their supply. It noted that Bitcoin is currently experiencing a period of “Plateau of Patience”, where the LTH supply tends to hover around the ATH, often from several months to over a year.

It added that the supply structure also bears similarities to early 2016 and early 2019. Notably, while Bitcoin’s price did not form new lows in 2016 and 2019, the actual bull run did not begin until 18 to 24 months into late 2020 and 2021. Period of parabolic increase usually witness a rapid increase in the percentage of holdings of LTH in profit, followed by profit taking.

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Long-term and short-term holder supply in profit/loss. Source: glassnode

The year-to-date strength in Bitcoin’s price is supported by an “explosive increase” in coins held for profit. The report added that bear market floors are characterized by widespread capitulation that also sees “an equal and opposite influx of demand to absorb it.”

Related: Bitcoin on-chain data highlights key similarities between 2019 and 2023 BTC price rally

When the price rises out of the bottom formation zone, all these coins return to profit. In 2023, a total of 6.2 million BTC returned to profit, representing 32.3% of supply, indicating a strong cost base for buyers below $30,000.

Bitcoin percent supply in profit. Source: glassnode

The long-term holder’s supply is a crucial factor to consider when analyzing the market, and Glassnode highlights the importance of patience in a market cycle. Bitcoin’s current supply structure indicates that while a bull run may not be coming anytime soon, BTC is unlikely to visit prices below the $15,500 level.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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