Short term holders are selling into the Bitcoin rally to take profit while they can, on-chain analysis shows.
Certain Bitcoin investors are selling while they can after the primary cryptocurrency reclaimed $23,000 earlier this month, according to Glassnode.
The blockchain intelligence provider’s latest report reviews recent on-chain behavioral patterns exhibited by both short and long-term holders.
Exiting While They Can
The newsletter, posted on Monday, begins by examining Bitcoin’s price, which have reclaimed “multiple on-chain pricing models.”
One model includes the investor price – which reflects the average acquisition price for all coins spent and distributed by Bitcoin miners. Having overcome this model at $17,400, the average miner has returned to a position of profitability.
The move has also returned many people’s Bitcoin back into the profit zone, with Percent Supply in Profit surging from 55% at $16,000 to 67% at $23,100. This was one of the sharpest spikes for Bitcoin profitability during a bear market that has ever occurred.
Glassnode stated that movements in this metric can be useful for identifying when a market recovery may be underway. That said, movements of this size also incentivize Bitcoin holders who have returned to profit to start realizing some of their gains.
In particular, the Percentage of Short-Term Holder Supply in Profit has returned above 97.5% – at which point investors “tend to seize the opportunity and exit at break-even or profit.”
“Given this substantial spike in profitability, the probability of sell pressure sourced from short term holders is likely to grow accordingly,” said Glassnode.
The data is already bearing this out: trading volume among short term Bitcoin holders (those whose coins last move less than 6 months ago) has skyrocketed well past its long term declining trend. Miners, too, have sold into the rally.
“Therefore, the sustainability of the current rally can be considered a balance between inflowing and newly deployed demand, meeting the supply drawn out of investor wallets by these higher prices,” Glassnode continued.
Long Term Holders
While short-term holders are selling off, the number coins that haven’t moved for over 6 months is growing at a rate of 100,000 BTC per month. That means that HODLer conviction remains strong, even amidst a market rally.
At current prices, the average long-term holder is at roughly a break-even basis, meaning their coins are at the same price they bought in at.
Last week, Glassnode noted that Bitcoin’s surge in volatility this month could signal the beginning of a cyclical bull market.