summary

After several months of relatively heavy distribution pressure, Bitcoin holder behavior appears to be shifting toward holding and accumulation.

Activity in the spot market suggests that there has been a clear build-up of selling pressure recently, and that this trend has yet to fully subside.

Compared to past cycle ATH breakthroughs, the long-term holder group currently holds a relatively large proportion of network wealth.

Overall, on-chain conditions suggest that the Bitcoin holder community is confident.

Big wallets return to cryptocurrency holding mode

As markets begin to slowly recover from last week’s sell-off, there is palpable uncertainty and indecision among digital asset investors. However, when analyzing the on-chain reaction of investors to these turbulent market conditions, a trend toward holding on is beginning to emerge.

Since Bitcoin hit its all-time high in March, the market has experienced a period of broad supply distribution, with wallets of all sizes participating. Over the past few weeks, this trend has shown early signs of reversing, especially for the largest wallets typically associated with ETFs. These large wallets appear to be returning to accumulation mode.

The Accumulation Trend Score (ATS) indicator assesses the weighted balance change of the entire market. The indicator also suggests that the market is shifting towards accumulation-dominated behavior.

The aforementioned shift towards accumulation prompted ATS to record its highest possible value of 1.0, indicating significant accumulation in the market over the past month.

This observation is consistent with the long-term holders (LTH) who were divesting heavily before the all-time high. This group has now resumed their preference for HODLing, with a total of +374k BTC transferred into LTH status in the past 3 months.

From this, we can infer that investors’ propensity to hold onto their tokens has now become a greater force relative to their pressure to spend.

We can also evaluate the 7-day change in LTH supply as a tool to assess the rate of change in its total balance.

We can see that LTH distribution is significant, which is typical of macro top formations, heading into the March ATH. Less than 1.7% of trading days recorded greater distribution pressure. Recently, this indicator has returned to positive territory, indicating that the LTH community has expressed a preference to hold its tokens.

This is despite the fact that from April to July, the spot price has been above the active investor cost basis, which represents the average acquisition price of active tokens in the market.

The cost basis of active investors can be considered a key threshold that demarcates bullish and bearish investor sentiment. As the market has managed to find support around this level, it indicates a degree of underlying strength in the market, suggesting that investors generally still expect positive momentum in the market in the short to medium term.

Assessing spot market bias

When the market is in a technical downtrend, we can use the CVD indicator to estimate the current net balance between buying and selling pressure in the spot market.

This indicator in turn can be used to assess medium-term market momentum, as well as any headwinds or tailwinds to price.Since the new ATH was formed, we have noticed a persistent mechanism of net selling pressure.

A positive CVD value indicates net buying pressure, while a negative value indicates net selling pressure.

When we analyze the annual median of spot CVD, we can see that the median has fluctuated between -$22 million and -$50 million over the past 2 years, indicating a net seller bias.

If we consider this long-standing median as a baseline for CVD equilibrium, we can generate an adjusted indicator variable that accounts for and corrects for this implicit sell-side bias.

When comparing the adjusted spot CVD (30d SMA) to the monthly percentage price change, an interesting convergence can be seen.

In this framework, the recent failure to break above the $70,000 region could be partially attributed to weak spot demand (negative adjusted CVD). Alternatively, a potential recovery in spot market demand could be confirmed when the adjusted CVD indicator returns to positive values.

Cycle Fluctuation

Sideways price action in recent months has caused distribution pressure on LTH to slow significantly. This has caused the percentage of network wealth held by this group to first stabilize and then begin to grow again.

Despite the massive sell-side pressure LTH has exerted on the market’s ATH, the wealth held by long-term investors is still at an all-time high compared to previous all-time highs.

This suggests that if BTC prices rise in the future, LTH may face further withdrawal pressure. It also shows that despite the recent sideways or even downward price movement, these investors are increasingly unwilling to sell their tokens at lower prices.

Both observations suggest a more patient and resilient community of holders despite volatile market conditions.

Finally, we can use the LTH Sell Side Risk Ratio to support this assessment. This tool measures the absolute sum of realized profits and losses locked in by investors, relative to the size of the asset (realized market cap). We can think of this metric in the following framework:

High values ​​indicate that investors are making large profits or losses relative to their cost basis when spending tokens. This situation indicates that the market may need to rebalance and usually occurs during periods of high price volatility.

Low values ​​indicate that most tokens are being spent relatively close to their breakeven cost basis, indicating that a degree of equilibrium has been reached. This situation typically indicates that the "breakeven" within the current price range has been exhausted, and generally describes a low volatility environment.

Compared with the previous ATH breakthrough, the LTH seller risk ratio is still at a low level. This means that the profit margin obtained by the LTH group is relatively small relative to the previous market cycle. This also means that the group is waiting for higher prices before increasing its distribution pressure.

Summarize

Despite the challenging and volatile market environment, long-term Bitcoin holders remain steadfast, with evidence suggesting they are increasing their holdings.

Compared to previous cycle peaks, this group of investors holds a higher percentage of Bitcoin network wealth, suggesting that investors are showing a degree of patience, waiting for higher prices. Additionally, during the largest price contraction in the cycle, this group of investors did not panic sell, highlighting the resilience of their overall conviction.

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