Thursday, July 25, 2024

Newly published research by onchain analytics company Glassnode reveals a notable shift in bitcoin (BTC) investor behavior, suggesting that the cryptocurrency market is emerging from an extended bearish period. The study observes the transfer of coins from long-term holders to short-term speculators as an indication of market recovery.

Glassnode employs a specific metric known as “realized capital” to calculate the total expenditure historically made to acquire the currently existing bitcoins. This metric provides insights into the timing of the last transfer of coins between different classes of investors. To further refine the data, Glassnode categorizes the bitcoin supply into “age bands,” which show the distribution of coins held for various durations.

According to the study, during bullish market conditions, older coins are generally sold and transferred from long-term investors to newer ones. Conversely, during bearish conditions, short-term speculators gradually divest their holdings to long-term investors who have a higher risk tolerance.

The research identifies coins that have been held for a duration of 1-2 years as constituting a crucial segment of long-term holders. This cohort’s holdings reach their peak during the troughs of bear markets as investors with strong conviction accumulate coins. On the opposite end of the spectrum, bitcoins held for less than a month are identified as the holdings of short-term speculators. Their portion of the overall bitcoin supply notably increases during bull markets due to the influx of new capital.

By contrasting the asset distributions of these two groups, Glassnode’s analytical models aim to pinpoint the current stage of the market cycle. The present configuration appears to mirror the recuperation stages witnessed after significant bear market lows, such as those in 2016 and 2019. Although bitcoin prices have recovered from their previous lows, the study notes that long-term holders still dominate, retaining control of over 80% of the existing bitcoin supply.

The report concludes by stating that a significant majority of the bitcoin supply is now more than six months old, indicating a dominant presence of long-term holders, often referred to as the HODLer cohort.

Additionally, Glassnode applies models that evaluate the profitability of both short-term and long-term holders based on their average cost of acquisition. These models suggest that the market could potentially be in an early bullish stage, with long-term holders generally being in a profitable position, while short-term traders hover around the break-even point.

What are your insights on Glassnode’s recent research about the dynamics of bitcoin ownership? Your thoughts and opinions on this matter are highly welcome in the comments section below.

Frequently Asked Questions (FAQs) about Bitcoin market recovery

What is the main focus of the Glassnode study on Bitcoin?

The main focus of the Glassnode study is to analyze how bitcoins are being transferred between different classes of investors, namely long-term holders and short-term speculators, in order to gauge the current state of the market. The study uses metrics such as “realized capital” and “age bands” to offer insights into this dynamic.

What does the term “realized capital” mean in the context of the Glassnode report?

In the Glassnode report, “realized capital” refers to the total amount historically paid to acquire all existing bitcoins. This metric helps to provide a snapshot of when coins last changed hands between investors.

How does Glassnode categorize the bitcoin supply?

Glassnode categorizes the bitcoin supply into “age bands” that display the distribution of coins held for various time periods. These age bands help identify long-term holders, typically those who have held coins for 1-2 years, and short-term speculators who usually hold bitcoins for less than a month.

What does the report say about the current state of the Bitcoin market?

The report suggests that the current state of the Bitcoin market is in a recovery phase following a major bear market. This is inferred from the observed shift in ownership from long-term holders to short-term speculators and supported by comparisons to past market cycles.

What are the findings regarding long-term and short-term holders?

The study finds that long-term holders, specifically those who have held coins for 1-2 years, generally accumulate during bear markets. Short-term speculators, holding bitcoins for less than a month, increase their share of the bitcoin supply during bull markets. Currently, long-term holders still control over 80% of the bitcoin supply.

What does the report conclude about the profitability of holders?

The report employs models that evaluate the profitability of both long-term and short-term holders based on their average cost basis. It indicates that the market may be in an early bullish phase where long-term holders are generally profitable, while short-term traders are around the break-even point.

Who is the intended audience for this report?

The report is intended for serious investors, market analysts, and financial professionals who are interested in gaining a nuanced understanding of the current dynamics of the Bitcoin market.

More about Bitcoin market recovery

  • Glassnode Official Website
  • Comprehensive Guide to Realized Capital in Cryptocurrency
  • Historical Bitcoin Market Cycles
  • Understanding Age Bands in Cryptocurrency Analysis
  • What Are Long-Term and Short-Term Holders in Cryptocurrency?

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5 comments

JohnDoeFinance October 18, 2023 - 9:54 am

im not surprised, been in crypto long enough to know that the bears hibernate but they dont die. Good to know there’s a research backing it up.

Reply
CryptoQueen October 18, 2023 - 7:23 pm

Quite interesting how the report says long-term holders still control 80% of the supply. thats a lotta conviction in the market.

Reply
TonyTheTrader October 18, 2023 - 7:51 pm

This report gives me some comfort. Was starting to wonder if the bear market would ever end. Seems like we’re on the upswing, fingers crossed!

Reply
SarahSavvy October 19, 2023 - 12:25 am

Realized capital, age bands, this is quite the deep dive. I’m all in for any info that helps me understand the market better. Gotta stay ahead.

Reply
MikeInvestor October 19, 2023 - 1:49 am

Wow, this is some heavy analysis right here. Glassnode’s really getting into the nitty gritty of investor behavior. Makes you think twice about just buying and holding.

Reply

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