On-chain analytics firm Glassnode explained that Bitcoin tends to reach potential peaks when long-term holders exhibit this pattern.
Long-term Bitcoin holders are increasing circulation
In a new report, Glassnode discussed the impact long-term BTC holders have on cryptocurrency supply dynamics. Here, LTH (long-term holder) refers to a Bitcoin investor who holds his coins for more than 155 days.
LTH is comprised of one of two main segments of the BTC user base based on holding time, with the other group known as “short-term holders” (STH).
Historically, LTH has proven to be a tenacious hand in the market. They don’t sell their coins quickly, regardless of what’s happening in the wider sector. STH, on the other hand, often reacts to FUD and FOMO events.
Therefore, it is not uncommon to see STH participating in sales. However, LTHs with consistent distribution are noteworthy as sales from typically tight HODLers can influence the market.
There are many ways to track the behavior of LTH, but in the context of the current discussion Glassnode used the “LTH Market Inflation Rate” metric.
The report explains:
It shows the annual ratio of Bitcoin accumulation or distribution by LTH compared to daily miner issuance. This ratio helps identify periods of net accumulation, during which LTH effectively removes Bitcoin from the market, and periods of net distribution, during which LTH adds to pressure on the sell side of the market.
Now, here is a chart showing the trend of BTC LTH market inflation rate over the past few years:
The value of the metric seems to have been on the rise in recent days | Source: Glassnode
In the chart, the analytics firm has also attached data on the inflation rate of assets. This is basically the amount miners bring into the circulating supply by solving blocks and receiving compensation for doing so.
When the LTH market inflation rate is 0%, these HODLers are accumulating exactly the same amount that miners are minting.
This means that anything below 0% means LTH is pulling coins from the supply, anything above that is a sign that miners are not distributing or buying enough to absorb what they are producing.
The graph shows that historically the price of a cryptocurrency has tended to reach an equilibrium and potentially peak when the LTH distribution peaks.
Recently, the LTH market inflation rate has been rising, but has not yet reached a significant level. On what this could mean for the market, Glassnode says:
Current LTH market inflation rate trends indicate that the distribution cycle is in the early stages and is approximately 30% complete. This suggests that there will be significant activity ahead within the current cycle until market equilibrium and potential price peaks are achieved from a supply and demand perspective.
BTC price
Bitcoin has regained most of its recovery over the past few days, with the current price falling to $63,800.
Looks like the price of the asset has witnessed a drawdown again | Source: BTCUSD on TradingView
Kanchanara from Unsplash.com, featured image from Glassnode.com, chart from TradingView.com
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