Analysts View Distribution of Bitcoin by Long-Term Holders as Bullish Signal
While in traditional markets, selling off long-held investments typically signals an impending downturn, the narrative differs within the crypto space. Analysts tracking long-term Bitcoin holders, or those holding coins for at least 155 days, view such distribution as a positive indicator of market strength.
Markus Thielen, the founder of 10x Research, pointed out that sharp declines in the supply held by long-term holders have historically coincided with strong Bitcoin rallies. For instance, such drops were observed during Bitcoin’s rallies in Q1 and Q4 of 2024. He noted that as long as long-term holders continue to offload their coins, Bitcoin remains susceptible to a short squeeze that could drive prices higher.
Currently, long-term holders possess around 13 million BTC. According to analytics firm Glassnode, over 1 million BTC changed hands during Bitcoin’s recent surge past $100,000, as short-term traders took advantage of the distribution from long-term holders. Glassnode stated, “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.”
However, the pace of selling by long-term holders has slowed recently. Glassnode reports that the rate of change in the long-term to short-term holder supply ratio has moderated, indicating that long-term holders are taking a more measured approach to selling.
Decreased Exchange Balances Point to Bullish Sentiment
The amount of Bitcoin held in wallets linked to centralized exchanges has decreased to 2.7 million BTC, down from over 3 million BTC six months ago. This reduction in exchange balances, typically seen as a bullish sign due to the reduced availability of coins for quick sale, is more complex than it appears.
According to Glassnode, the decline in exchange balances is not solely due to individual investors pulling coins off exchanges. Instead, much of this decrease can be attributed to the movement of coins into ETFs, such as those managed by custodians like Coinbase. These coins are now held in ETF wallets, which are liquid and can be traded just as easily as the actual coins.
When adjusting for the coins that have shifted into ETFs, Glassnode calculates that over 3 million BTC are still held in alternative investment vehicles, suggesting that the apparent supply shock may not be as significant as initially thought.
The combination of long-term holder distribution and the reallocation of Bitcoin into more liquid investment vehicles indicates ongoing bullish sentiment in the market, with increasing demand helping absorb the supply.
