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Long-term Bitcoin holders may be reducing their holdings, where is the top of the Bitcoin bull market?

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Long-term holders are reducing their holdings of Bitcoin is a big evidence that Bitcoin is in a bull market.

Original title: "Quantifying Short-Term and Long-Term Holder Bitcoin Supply"

Original source: Rafael Schultze-Kraft, Chief Technology Officer of Glassnode

Original compilation: Rhythm 0x49

In order to judge how long-term investors and short-term traders Holding Bitcoin, Rafael created a set of on-chain indicators to show when these two types of investors are in profit or loss.

Understanding investor behavior from the perspective of the chain, distinguishing between long-term holders (LTH, investors) and short-term holders Ownership (STH, trader) is crucial.

The goal of traders is to "beat the market" and take advantage of price fluctuations in the short term, while the time preference of long-term investors Low, long trading hours, still a firm belief that BTC will see price appreciation in the future. These market participants are either HODL (holders, true HODLers will not sell their tokens) over a long period of time, or only temporarily reduce their Bitcoin positions in a bull market for profit.

But how is this different behavior quantified, and what conclusions can be drawn about the market from it?

This article will introduce a new method to compare the total amount of Bitcoin held by holders and traders Categorize and create a set of on-chain metrics to show when long-term holders and short-term holders are in profit or loss.

155 days is the threshold for long-term and short-term holders

155 days of unspent transaction output (UTXO) is a threshold that marks whether Bitcoin is held long-term or short-term (detailed reason).

UTXO in the specified time window (in days) the relationship between the probability of transfer and its currency age

In order to better analyze and judge, use To determine the amount of BTC owned by long-term and short-term holders, the time since the (average) purchase date for each address should be considered, and if it exceeds 155 days, then it can be judged as a long-term holder.

At the same time, Glassnode also subdivides the 155-day threshold and converts it into a smooth weighted coefficient curve. It can be simply understood as a logic function with a midpoint of 155 and a transition width of 10.

Weighting coefficients for classification of long-term and short-term holders. Using a logic function centered at 155, the transition width is 10

Now, when an address has a balance of 155 days, for The contribution coefficients of long-term and short-term holders are the same, each accounting for 50%. At the same time, about 177 days (about half a year) after an address obtained BTC, 90% of it belonged to long-term holders. An advantage of using such a continuous transition between STH and LTH is that the resulting metrics are smooth and not affected by a small number of outliers. (Note: In order to further improve the data and better reflect the behavior of real HODLers, the analysis does not include Bitcoin held by trading platforms.)

Long-term holders

As of November 17, 2020, the current number of Bitcoins in LTH is 12.3 million BTC, About 66% of the circulating supply.

The amount of BTC held by long-term holders is mainly manifested in the history of Bitcoin. During the bull market, LTH held There is a reduction in the number (as shown below). At present, the number of LTH holdings has begun to decline, perhaps indicating that a new bull market is coming.

Long-term Bitcoin holder

Judging from the monthly changes in LTH holdings, LTH has reduced its positions in the bull market and accumulated chips in the bear market. At present, it can be seen that the position of LTH is decreasing, which is also more common in the previous rounds of bull and bear market, which may mean that it is now in the early stage of the bull market.

LTH net position change

Short-term holders

As the price of BTC rises, short-term holders Also accumulating Bitcoin. This suggests that earlier mined bitcoins were reactivated in the bull market and began to circulate. In the past month, short-term holders increased their holdings by 500,000 BTCs, and currently hold about 3.7 million BTCs, accounting for 20% of the circulation.

Short-term holders hold Bitcoin

Short-term and long-term Owner's profit and loss

By observing the purchase date of each bitcoin address, the average purchase price can be calculated , to judge whether the current long-term holding address and short-term holding address are in a profit or loss state. Currently, 12 million BTC held by long-term holders (about 97%) and 3.5 million BTC held by short-term holders (about 97%) are in a profitable state.

The total profit of BTC held by long-term and short-term investors

As the chart below shows, during bull markets, most long-term holders are in profit.

On the contrary, in a bear market, most long-term holders are at a loss, With the arrival of a new round of bull market, the number of long-term holders will decrease. On the one hand, if the price suddenly drops, such as 312, the long-term holders who were previously profitable will fall into a loss; on the other hand, short-term holders may become long-term holders, such as investors who entered the market at the high point at the end of 2017 , is the long-term loss-making investors

However, at present, almost all long-term investors have returned to the profit trend, including The vast majority of investors in 2017.

Long-term holders are in profit and loss; when Bitcoin enters a bear market, long-term Holders enter a state of loss, and "loss valleys" appear periodically

Comparison of old and new indicators

By comparing the old and new indicators of Glassnode, it is found that the overall trend and the range of rise and fall of each indicator are similar. However, there is a difference in the position change data. In the traditional HODLer net position change indicators, the positive value is often limited. In the new indicator, the indicator is not limited in direction.

HODLer net position change (black line) and new long-term There is a comparison between net position changes (red/green); the former provides a bias due to its upper bound on positive values derived from Bitcoin's "liveness" metric, but the new method is more balanced and provides Changes in investors' BTC positions provide a clearer picture.

Summary

Glassnode introduction A new method to distinguish the amount of Bitcoin held by long-term investors and short-term traders, and a deeper understanding of the investment behavior of investors in the BTC market in different cycles.

Through this approach, this new on-chain metric quantifies the holdings of long- and short-term holders It is a strong indication that the bull market for Bitcoin has arrived.