Bitcoin short-term holders are mainly panic selling, while long-term holders are still buying on dips.
Original title: “Glassnode 丨 BTC panic and fall, HODLer is still increasing positions? 》
Written by: Glassnode
Translation: Zheng Qirui
On the chain, we can observe an obvious bifurcation reaction. New entrants panic selling and suffer losses, while long-term holders seem to be relatively unaffected by the news .
Due to a series of tweets released by Elon Musk, the market has expressed concerns about the power consumption of mining, and Bitcoin price transactions have fallen by more than 26.1% this week. The market opened this week at a high of $59,463, and was affected by a tweet, and the price of Bitcoin fell to $43,963.
Musk’s tweet elaborated on the negative externalities of energy consumption and put forward the hypothesis that 10 times the expansion speed and larger blocks on Dogecoin are a viable alternative. Unfortunately, this has caused widespread chaos in the market, although for many Bitcoin HODLers, this is just another quiet day .
On the chain, we can observe an obvious bifurcation reaction. New entrants panic selling and suffer losses, while long-term holders seem to be relatively unaffected by the news . There are many supply and demand dynamics similar to the macro top of 2017, but there are some special differences that will challenge beliefs in bull and bear markets.
Measure the size of the correction
First, we will assess the scale of this correction compared to the bull market in 2017 and 2021. The current correction is 28% lower than the ATH of $63.6,000 on April 13. This is the deepest correction in the current bull market, but it is consistent with the five major retracements in the 2017 bull market .
In terms of the duration of the bull market , the primary bull market in 2021 has lasted for about 200 days, which is relatively short compared to the year-long bull market operation in 2017 .
The number of addresses that are currently profitable provides a perspective on the market below the equilibrium line. We can observe that this correction resulted in more than 23% of on-chain addresses being at a loss, compared to only three upward trend periods since 2016. All these comparative callbacks are related to relatively extreme events .
In 2016, after a two-year bear market, the retracement after the rebound left the bottom.
In 2019, after the 1.5-year bear market, the retracement after the rebound was mainly driven by the squeeze of leveraged short sellers.
In 2020, after the COVID sell-off on March 12, the consolidation after global uncertainty.
Panic selling by new entrants
New entrants panic selling , causing them heavy losses. Both aSOPR and STH-SOPR fell below 1.0 again. Both of these indicators take into account the degree of profit realized by the cryptocurrency that moves on the chain. A higher value indicates that profitable coins are moving, and a value below 1.0 indicates that most coins end up at a higher price. mobile.
The aSOPR indicator considers the entire market and also filters out all coins with a lifespan of less than 1 hour (these coins are usually temporary fluctuations, so they are not economically important). STH-SOPR only filters cryptocurrencies that are less than 155 days old, and therefore represents entities that purchase cryptocurrencies during the current bull market cycle.
Both indicators have fallen below 1.0, indicating that the overall loss has been realized on the chain, and this effect is most obvious in STH-SOPR. This is the second time that STH-SOPR has fallen below 1.0 in this adjustment, indicating a panic selling by the majority of new holders .
The total number of addresses holding non-zero BTC balances also dropped by 2.8% from the recent all-time high of 38.7 million addresses. A total of 1.1 million addresses sold all their cryptocurrencies in this adjustment, and there is evidence that they are currently undergoing panic selling .
If we observe the cyclical pattern of the total supply held by short-term holders (STH), we can also see that a panic selling pattern is taking place, similar to the situation observed at the macro peak in 2017. This graph shows that the Bitcoin market tends to find a local or macro peak when new holders have a relatively large proportion of the total supply (i.e., the larger supply of cryptocurrency held by newer addresses) ).
However, it should be noted that the current peak of cryptocurrencies owned by STH is significantly lower than 2017 in terms of the number of cryptocurrencies and the percentage of circulating supply. The cryptocurrency of new holders recently reached 28% of the circulating supply (5.3M BTC), which is 9% less than the peak in 2017 .
Given that Bitcoin is traded at a larger market valuation, this may reflect a larger inflow of capital , which requires an advantage in market capitalization. It may also provide an indication that this may be a retracement of a larger time frame in the bull market cycle, as the weak surrender and the strong start to accumulate cheaper cryptocurrencies again .
Exchange traffic dynamics
In view of our observation of panic selling, we found that the total inflow of BTC on the exchange reached a clear high point. At the beginning of this latest correction phase, a net inflow of 27,500 BTC was observed. This is second only to the March 2020 sell-off and the 2019 PlusToken Ponzi scheme .
However, if we subdivide this observation into the two largest exchanges, Binance and Coinbase, we can see two different status quo.
Binance’s main users are non-U.S. citizens, it is the preferred place for retail investors and the main recipient of this net inflow . We can also see that in the past few months, the scale of inflows and outflows has increased, which shows that the macro sentiment of Binance users is fluctuating. This further indicates that the recent capital inflows may be driven by new market entrants (panic sellers), or may be due to the shift of capital to other crypto assets .
On the contrary, since Coinbase broke through the 20K USD ATH in the last cycle, BTC has almost completely net outflow, and this trend continues this week . Coinbase is the preferred place for US institutions. Considering the typical daily withdrawal scale (10,000 to 20,000 BTC/day), this indicates that in this adjustment, larger buyers are still actively accumulating cryptocurrencies .
Long-term holders bought in this downturn
In contrast to panic selling by new entrants, long-term holders seem to be buying this downtrend and accumulating cheaper cryptocurrencies. Although the number of non-zero addresses has declined in this adjustment, the number of addresses in a cumulative state has increased by 1.1% since the most recent low. Accumulation addresses are defined as those addresses that have at least two buy transactions but never sold any cryptocurrency .
Similarly, the cryptocurrency held by long-term holders (LTH) has also returned to a growth mode, which is again similar to the 2017 macro top. This chart mainly reflects those buyers who bought cryptocurrencies at the end of 2020/January 2021, but have not sold them yet. As the supply of LTH starts to rise, this indicates that the mature amount of cryptocurrency over the 5-month dormancy period exceeds the amount of old coins sold for profit.
The current supply of LTH is more than 2.4 million BTC (accounting for 8% of the circulating supply) than it was at the peak in 2017. This shows that a large number of cryptocurrencies have been transferred to and kept in illiquid cold wallets, and this trend is continuing .
In general, the Bitcoin market is undergoing a major historical correction. There are strong signals that short-term holders are dominated by panic selling, but long-term holders are stepping in to buy downtrends, and their confidence is basically unshakable . To say the least, the narrative of PoW energy consumption has little impact on the market, and what follows will be a test of belief in the entire Bitcoin market.
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