Bear markets are often marked by a capitulation event, where discouraged investors abandon their positions. Asset prices then consolidate or bottom out as inflows to that sector taper off.
Glassnode recently reported that Bitcoin hodlers are “the only ones left” with Bitcoin prices below $30K.
The lack of buyers can be seen in the decrease in wallet balances over the past month. This is the same process that occurred after the May 2021 crypto market sell-off.
Number of Bitcoin addresses that have a balance above zero Glassnode
Contrary to the November 2018 and March 2020 sell-offs, which were followed by an increase in on-chain activity that “initiated subsequent bull runs”, the latest sell-off has not yet “inspire an infusion of new users into this space.” Glassnode analysts believe that this suggests that current activity is primarily being driven by hodlers.
Heavy accumulation signs
Although many investors don’t like BTC’s sideways price movement, contrarian investors see it as an opportunity for accumulation. This is evident by the Bitcoin accumulation trend score, which has “returned a near perfect score of 0.9” over the past two weeks.
Trend score for Bitcoin accumulation Source: Glassnode
Glassnode says that bearish trends are triggered by high scores on this metric when there is a significant price correction. Investor psychology shifts from uncertainty towards value accumulation.
CryptoQuant CEO Ki Young Ju also mentioned the idea that Bitcoin is currently at an accumulation phase. He posted the following tweet, asking his followers to “Why not purchase?”
The data clearly shows that recent accumulation was mainly driven by entities with less 100 BTC or entities with more 10,000 BTC.
The recent volatility saw the aggregate balance of entities with less than 100 BTC increase by 80,724 BTC. Glassnode observed that this was similar to the net 80 081 BTC liquidated in the LUNA Foundation Guard.
Entities with less than 100 BTC hold the majority of Bitcoin supply. Source: Glassnode
Entities holding more than 10,000 BTC added 46.269 Bitcoin to their accounts during the same period. However, entities holding 100 BTC or 10,000 BTC “maintained an overall neutral rating of around 0.5,” which suggests that there has been relatively little net movement in their holdings.
Related: Bitcoin’s gains in recent months have been called a bottom by traders, but many metrics remain bearish
Hodlers who are active for long-term periods of time remain active
The main driver of the current price action is likely to be long-term Bitcoin owners. Some are actively accumulating while others are realizing losses at an average rate of -27%.
Long-term Bitcoin holder has spent output profit ratio. Source: Glassnode
Despite some selling by long-term holders, the total supply of these wallets has recently returned to its highest level of 13.048 millions BTC.
“Unless there is significant coin redistribution, we can expect this supply metric will begin climbing over the next 3-4 month. This suggests that HODLers continue their gradual soak-up and retention of supply.”
Although some Bitcoin holders may be disillusioned by recent volatility, the data clearly shows that the majority of serious Bitcoin holders will not spend their supply, “even if it is currently held at a loss.”
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