The return to profitability of some of the holders favors the development of a bullish market structure. In the coming weeks, the behavior of long-term holders should tend towards profit taking.
Analyse on-chain du Bitcoin (BTC) – Transition vers un biais haussier ?
Bitcoin consolidates towards $22,000
After a particularly bullish month of January, the price of Bitcoin (BTC) is consolidating around $22,000, forming the first range of the year 2023.
Now that the majority of BTC investors are in latent profit, noticeable changes in the behavior of holders in the short and long term should appear gradually and steer the market structure towards a bullish bias.
Figure 1: Daily price of BTC
Today we will observe the current condition of long-term holders (LTH) as well as their potential future behavior to determine the characteristics of a long-term bullish bias for BTC.
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The cyclic behavior of LTHs
BTC market cycles are punctuated by several parameters, one of the main ones being that of the profitability of BTC holders.
Encouraging participants to save and go dormant or to spend and transact, the marginal return to capital is a major motive of economic activity.
This return to the state of profit is notably observable by the interaction between the spot price of BTC and the various on-chain base costs, which reflect the buying/selling behavior of participants.
While we noted over the past few weeks that the realized price of long-term holders (LTH) around $22,300 was the ultimate on-chain resistance level to break through, it is now overtaken by the spot price. .
Figure 2: Realized price (average, STH, LTH)
This indicates that the majority of BTC holders have their heads above water and can now spend their holdings at a profit, which forms the basis for a long-term bullish move.
Historically, the bullish crossing of the realized price of LTH (in blue) precedes the bull markets with indisputable precision. This dynamic return to long-term profitability can also be measured via the LTH-MVRV metric, which measures the difference between the spot price of BTC and the realized price of LTH.
When the LTH-MVRV is greater than 1, the average long-term holder is in unrealized profit; When the LTH-MVRV is less than 1 (green zone), the average long-term holder is in latent loss; If the LTH-MVRV is equal to or close to 1the profitability of the average long-term holder approaches equilibrium.
Figure 3: LTH-MVRV ratio
Confirming previous observations, the recent jump of LTH-MVRV above 1 indicates a historic fourth return to long-term profitability which traditionally marks the transition between the end of bear markets and the beginning of bull markets.
Now that the latent profitability of LTH is positive again, we should note a crucial change in behavior from this cohort in the coming weeks. Indeed, the cyclic behavior of LTH can be defined by three phases:
HODLing (in light red): LTH profitability falls as an up cycle comes to an end. The cohort locks in its positions and accumulates aggressively as the price falls;
Loss taking (in dark red): Bear market pain peaks, forcing less resilient holders to sell at a loss;
Profit taking (in blue): LTH profitability climbs as a new upward cycle begins. The cohort unlocks its positions and distributes massively.
Figure 4: Supply held by LTHs (blue) and LTH spend profitability ratio (orange)
Thus, a fall in the supply of LTHs (distribution), coupled with an increase in their profitability ratio above 1 (profit taking) would indicate that phase 3 has begun. This profit-taking behavior in the strength of a rise is also measurable by the age of the dormant supply. Indeed, the supply of BTC that is at least one year old is an excellent indicator of behavioral cycles in the market.
Figure 5: Percentage of supply at least one year old
We can assume that many old BTC HODLs are about to be distributed by making profits during a bull market when this metric forms a top (in green).
Conversely, a bottom reversing upwards (in red) indicates the return of a HODLing feature (savings) when a bull market comes to an end.
Currently, the formation of a cyclical peak in the supply of BTC at least one year old indicates that long-term holders have slowed their accumulation and wait for a rise in the price of BTC to begin the take profit phase described above.
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Summary of this on-chain analysis of BTC
Finally, this week’s data indicates that the return to profitability of all cohorts of holders favors the development of a bull market structure.
The fact that the LTH cohort has come out of the water suggests that the behavior of long-term holders should tend in the coming weeks towards a profit distribution of their assets.
This dynamic would anchor the market in a context of the beginning of a bullrun where new demand would absorb the selling pressure from LTH profit taking.
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Sources – Figures 1 to 5: Glassnode
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On-chain analyst, fervent fighter of informational asymmetry.
My goal is to inform everyone about the state of Bitcoin (as an asset and a distributed network) through the prism of on-chain analysis.
Teacher. Chain
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