Long-Term Holders

‘Extreme demand’ for BTC at $20K creating new support levels: Glassnode

The latest analysis by Glassnode suggests that the worst of the sell-offs could be concluded, but the market still needs time to recover.

“Extreme” demand at the $20,000 price point for Bitcoin (BTC) appears to have forced the coins back into the hands of investors who care less about price while creating a new realized price level.

In the latest The Week OnChain Newsletter published on Monday, Glassnode’s UkuriaOC pointed to “extreme demand” around the $20,000 region, noting that each psychological price level from $40,000 to $30,000 to $20,000 creates a new group of short-term holders (STHs).

The Glassnode analyst noted that much of the supply that new STHs bought during that drawdown has not been sold even though prices are significantly down. This may be due to less price-sensitive buyers or those who care more about Bitcoin fundamentals than investment gains, driving demand.

Between late April through June, the BTC price has fallen 55% from $40,000 to a low of about $18,100, according to CoinGecko.

Glassnode wrote that this suggests the newly-minted STHs are price insensitive buyers with more confidence in Bitcoin, adding that their conversion from a STH to a long-term holder (LTH), who does not sell for at least 155 days, would help confirm this:

“It would be constructive to see these STH held coins at the $40k-$50K level start to mature to LTH status over coming weeks, helping to bolster this argument.”

In this current bear market, confirmed LTHs have locked in nearly 400 days straight of yearly profitability, performing better than 30-day profitability.

This is nearly the same duration that LTHs experienced during the 2018 bear market. Glassnode wrote that this suggests losses are being locked in by LTHs which, if the previous argument holds, means that the new buyers have less price sensitivity than the cohort who sold, meaning they could become the newest group of LTHs.

Another point of note in the report is that “unprecedented forced selling” from crypto companies amid mass liquidations and bankruptcies created conditions ripe for a relief pump.

The report concludes by stating that while the “worst of the capitulation may be over,” BTC could remain in this low range for some time as the cost basis for new coin buyers has diverged below the realized price for only about 17 days straight. Previous bear cycles have endured low divergences between 248 and 575 days.

BTC has retreated 3.1% over the past 24 hours to trade at $21,146 at the time of writing.

Longer-term Bitcoin holder losses hit two year lows

Bitcoin’s long-term holders are beginning to suffer losses matching those from previous bear markets, and Glassnode believes the pain may continue, and even get worse.

Long-term Bitcoin holders are sitting on their largest losses since the March 2020 capitulation and the 2018-2019 bear market but may have to keep waiting for relief.

Calculated by measuring the value of coins deposited to exchanges, aggregated realized losses from long-term holders (LTH) of Bitcoin (BTC) exceeded 0.006% of the market capitalization by May 29 according to Glassnode’s The Week Onchain report from June 6.

Long-term holders are suffering their worst losses since March 2020.

However, the dramatic losses may continue for some time if historic loss patterns from previous bear markets are to be repeated. From 2018 to 2019, LTH losses reached a peak of 0.015% of the market cap, and those losses extended for about a year. The current losses to long-termers have only been observed for about a month.

Glassnode writes that LTH losses now resemble those from previous bear markets, but that they need to continue for a longer period of time before being truly comparable. The report states:

“The LTH losses on coins deposited to exchanges have now reached a magnitude comparable to previous bear markets. However, we do not yet have the duration component.”

Glassnode defines LTH as a holder that has not moved their coins for at least 155 days. However, anyone that bought BTC before December 2019 will still be up on their investment … for now.

It is also worth noting that in both 2019 and 2020, prices rapidly recovered by bouncing off their lows. Cointelegraph reported on Tuesday that there will likely be a capitulation event before any significant price recovery can take place.

Despite the gloomy price outlook, inflows to digital asset investment products such as Bitcoin exchange-traded funds (ETF) topped $100 million last week. CoinShares June 6 report highlights that most of the inflows were from the Americas, suggesting that European investors are still bearish at the moment.

CoinShares also pointed out the difference in exchange flows between BTC and Ethereum (ETH). BTC exchange inflows have netted about $506 million in value through 2022 so far, whereas ETH has had net outflows of $357 million. This suggests that market sentiment for ETH is much lower than that for BTC at the moment.

Bitcoin prices are down 5.3% over the past 24 hours, trading at $29,567 according to data from CoinGecko. Ethereum is down 6.7% over the same period, trading at $1,756 having lost 34% over the past month.