Recently, I read an analysis by Glassnode on BTC long-term holders. A long-term holder is an investor that has had their Bitcoin for at least 155 days. In the article, Liesl from Glassnode points out that we have seen a shift in the age of coins being transacted. Since the end of November, older coins have been transacted more which shows some longer term holders are starting to realize profits.
The amount of BTC coins in profit currently is very close to 100% as we near all-time highs. About 2/3’s of the Bitcoin circulating supply are owned by long-term holders.
As you can see in the chart above, the amount of long-term holders in profit is starting to drop which tells us that they’re beginning to sell. The odd thing is Bitcoin price is rising at the same time. Looking closely we can see a sudden drop in price followed by that being bought up quickly and rallying back.
Two possible scenarios seem likely for this. First, some holders that bought below $10,000 wanted to sell when Bitcoin reached its all-time high expecting a pullback due to strong resistance at that price. Then, they bought back once it dipped. Second, once the drop occurred from long-term holders selling, new investors bought it up as their opportunity to jump in.
It may be alarming to see some long-term holders beginning to sell but in fact this is a common thing during previous bull runs.
Backed by evidence from previous bulls runs, the peak of Bitcoins price usually happens right before the bottom of the long-term holders in profit metric. However, at the start of long-term holders selling usually comes the parabolic stage in Bitcoin.
The reasoning behind this likely goes back to what we spoke about in previous articles. Smart money usually buys well in advance to the next bull run and takes profits once it happens. Some of those investors may want to take profit earlier than others. They may want to buy back in considering Bitcoin bull runs usually have 40% pullbacks before the peak price. They may also just want to play it safe and sell out early.
In contrast, retail FOMO kicks in once Bitcoin starts hitting all-time highs. Once retail starts buying, that puts Bitcoin into a parabolic state causing the price to rise quickly. That may cause other long-term investors to start selling who waited longer or re-bought during a pullback. Once long-term holders have sold and stopped buying, price drops and many retail buyers must sell as well or get caught holding the bag.
The conclusion behind this is to anticipate the bottom of long-term holders in profit as another gauge to sell as close to the top as possible.
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Resources I Use
I use Glassnode for all the metrics I track on the Bitcoin network. Their platform is extremely user friendly and fun to use.
Binance is the main exchange I use to trade the crypto markets.
Trading Alpha has built their own indicators that provide buy and sell signals for crypto and equities trading.
I use Tradingview daily to analyze trading charts and find areas of support and resistance.
I learned how to trade through the Bulls on Wall Street program. I’m in this chat everyday giving out my trade ideas.
Nothing in this article is investment advice. I’m not a financial advisor. Do not make investment decisions based on what is in this article or any other article written by BTC News or Blockedia.