If someone told you that stock market investors are offloading their cherished holdings, you would likely interpret it as a sign of an impending market downturn. However, the narrative differs in the crypto market, where such selling indicates bullishness, according to analysts observing historical trends in the supply held by long-term investors—defined as wallets holding coins for at least 155 days or over five months.
Markus Thielen, founder of 10x Research, stated in a report shared with CoinDesk, “Based on our analysis, sharp declines in long-term holder supply (purple line) have frequently coincided with strong Bitcoin rallies (white line), as seen in Q1 and Q4 of 2024. As long as long-term holders continue reducing their balances, Bitcoin remains at risk of a short squeeze to the upside.” This insight sheds light on the current dynamics influencing Bitcoin’s market movements.
As of now, the total supply held by long-term holders has dropped to approximately 13 million BTC. Analytics firm Glassnode reports that over 1 million BTC have changed hands during the recent price rise above $100,000, with short-term traders capitalizing on the distribution by long-term holders.
According to Glassnode, “During the recent rally above $100K, 1.1M BTC have transferred from long-term to short-term holders, representing an impressive inflow of demand to absorb this supply at prices above $90K.” This transaction activity underscores a significant shift in the market’s momentum.
It is important to note, however, that the pace at which long-term holders are selling has slowed. This slowdown is observable in the monthly rate of change in the long-term to short-term holder supply ratio. The current trajectory indicates a more measured approach to selling by long-term holders, proving less harmful than it was earlier this month.
Exchange Balance Trends
The number of BTC held in wallets associated with centralized exchanges has declined to 2.7 million BTC, down from over 3 million BTC about six months ago, according to Glassnode. This exodus of BTC from exchanges, which results in a reduced availability of coins for quick sales, is widely viewed as a bullish indicator in the crypto community.
However, the dynamics have evolved since the inception of spot ETFs in the U.S. a year ago. Glassnode explains, “While many interpret this as a form of supply shock caused by a mass of coins being withdrawn by individual investors—potentially creating upward price pressure—we believe the majority of this decline stems from coins reshuffling into ETF wallets managed by custodians like Coinbase.”
In essence, these coins have transitioned into ETFs—liquid investment vehicles that are active in trading and can be bought and sold with the same ease as actual coins. Upon adjustment for coins moved to alternative investment vehicles, Glassnode indicates that the exchange balance is over 3 million BTC. This highlights the complexity of the current market landscape for Bitcoin and the potential bullish signals intertwined within these trends.
