4 - 6 minute read
Bitcoin (BTC) has struggled to overcome $30,000 resistance in recent weeks, and multiple fakeouts have frustrated Bitcoin bulls. In the latest edition of its weekly newsletter, “The Week On-Chain,” analytics firm Glassnode flagged the ongoing influence of “short-term holders” (STHs) on BTC price action. According to Glassnode, STHs may be responsible for speculative behavior, including profit-taking, that has become prevalent in 2023.
Among the metrics contributing evidence is market value to realized value (MVRV), which tracks spot price and the on-chain cost basis of specific investor segments. STH-MVRV reflects the relationship as it impacts STHs, defined as those hodling bitcoins for 155 days or less.
“At its latest local peak in mid-March, STH-MVRV hit 1.37 – conspicuously close to “macro top” territory and the highest score since October 2021, just before BTC/USD hit its current all-time highs of $69,000,” Glassnode said.
As of May 2, however, STH-MVRV measures 1.15 and is falling toward its 1.0 point of equilibrium, where spot price matches cost basis. For that to complete, however, BTC/USD would need to fall to $24,400.
“Recent resistance was found at the $30k level, corresponding with STH-MVRV hitting 1.33, and putting new investors at an average 33% profit,” Glassnode continued.
“Should a deeper market correction develop, a price of $24.4K level would bring a STH-MVRV back to a break-even value of 1.0, which has shown to be a point of support in up-trending markets.”
Backing up STH-MVRV is a similar trend in the ratio of short-term holder unrealized profit versus loss. This, too, favors $24,400 as a bullish inflection point.
In 2023, however, it is not only short-term speculators engaging in opportunistic profiteering. Long-term holders (LTHs) have been selling into rallies, Glassnode says, unloading BTC supply onto those new market entrants. This has increased the overall share of BTC classed as “young supply,” or that active at most six months prior.
“The rising share of younger supply during a rally is an indication of capital flowing into the market,” Glassnode stated. “This also signals that Old Supply (> 6-months) is spending, often taking advantage of this demand liquidity, leading to a net transfer of cheap/old coins to new buyers at higher prices.”
Year-to-date, young supply has increased by 8.4%, or 366,000 BTC. Overall, “The Week On-Chain” summarized, LTHs remain in control of the supply, with net new entries “relatively soft.”
The Bottom Line
As Bitcoin struggles to overcome $30,000 resistance, Glassnode’s report suggests that short-term holders may be responsible for speculative behavior, including profit-taking, that has become prevalent in 2023. According to Glassnode, the market may need to drop below $25,000 to flush out these speculators. Long-term holders have been selling into rallies, unloading BTC supply onto new market entrants, which has increased the overall share of BTC classed as “young supply.” Year-to-date, young supply has increased by 8.4%, or 366,000 BTC. Overall, LTHs remain in control of the supply, with net new entries “relatively soft.” Traders should monitor Bitcoin’s price action and consider the potential impact of these trends on their trading strategies.