On-chain analysis firm Glassnode has explained that bitcoin tends to reach a potential high when long-term holders display this pattern.
Long-term bitcoin holders have been increasing distribution
In a new report, glass node discussed the influence that long-term btc holders have on the supply dynamics of the cryptocurrency. “Long-term holders” (LTH) here refer to bitcoin investors who have held their coins for more than 155 days.
LTHs comprise one of the two main divisions of the btc user base based on holding time, with the other cohort being known as “short-term holders” (STH).
Historically, LTHs have proven to be the persistent hands of the market. They are not quick to sell their coins regardless of what is happening in the broader sector. STHs, on the other hand, tend to react to FUD and FOMO events.
As such, it is not unusual to see STHs participating in sales. However, LTHs showing sustained distribution may be something to watch out for, as sales by these HODLers, who typically sit still, may have implications for the market.
There are many different ways to track the behavior of LTH, but in the context of the current discussion, Glassnode has used the “LTH Market Inflation Rate” metric.
As the report explains:
Shows the annualized rate of bitcoin accumulation or distribution by LTH relative to the daily issuance of miners. This rate helps identify periods of net accumulation, where LTHs are effectively removing bitcoin from the market, and periods of net distribution, where LTHs are increasing selling pressure from the market.
Now, here is a chart showing the trend in the inflation rate of the btc LTH market over the past few years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/Bitcoin-Long-Term-Holders-and-Top-Price-Glassnode-Reveals-Pattern.png" alt="bitcoin LTH market inflation rate” width=”1800″ height=”1013″ loading=”lazy” data-recalc-dims=”1″/>
The value of the metric seems to have been on the rise in recent days | Source: bitcoin-halving-2024/" target="_blank" rel="nofollow">Glassnode
In the graph, the analysis firm also attached data on the asset's inflation rate, which is basically the amount that miners introduce into the circulating supply by solving blocks and receiving rewards for them.
When the inflation rate of the LTH market is equal to 0%, these HODLers are accumulating amounts exactly equal to those issued by miners.
This implies that the indicator below the 0% mark suggests that LTHs are withdrawing coins from supply, while being above is a sign that they are distributing or simply not buying enough to absorb what the miners are producing. .
The chart shows that historically, the price of the cryptocurrency has tended to reach a steady state and potentially even a peak when the LTH distribution peaks.
The LTH market inflation rate has increased recently, but has not yet reached significant levels. As for what this could mean for the market, Glassnode says:
Currently, the trend in the LTH market inflation rate indicates that we are in an early phase of a distribution cycle, with around 30% completed. This suggests significant activity ahead within the current cycle until we reach a point of market equilibrium from a supply and demand perspective and potential price highs.
btc Price
bitcoin has retraced most of its rally over the past few days, as its price has now declined to $63,800.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/Bitcoin-Long-Term-Holders-and-Top-Price-Glassnode-Reveals-Pattern" alt="bitcoin price chart” width=”1534″ height=”854″/>
Looks like the price of the asset has witnessed a drawdown again | Source: BTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, Glassnode.com, TradingView.com chart
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