In today’s on-chain analysis, BeInCrypto examines several indicators regarding long-term and short-term Bitcoin holders to determine the health of the current cryptocurrency market. The capitulation of two types of BTC holders would mean that the market is strongly cooled and that the bottom may have already been reached.
BTC holders are divided into two groups, separated by a somewhat arbitrary threshold of 155 days. Users who hold their coins for more than 155 days are called long-term holders (LTH). In contrast, users who hold their tokens for less than 155 days are short-term holders (STH).
The cryptocurrency market tends to reward participants who are able to hold their assets for the long term. BTC price history shows that an effective method to avoid high local volatility is the HODL strategy. This involves buying and holding your cryptocurrencies for the long term, regardless of their current price.
Therefore, coins in LTH hands tend to be profitable, less dependent on local fluctuations in the price of BTC. The situation is different for STHs, whose portfolios are highly dependent on short-term market trends.
LTH profits are down
Although long-term holders tend to be in better shape than short-term holders, there are market conditions where their coins also generate little profit or suffer a loss. This was illustrated by a graph published in a recent Glassnode report, which juxtaposes the monthly and annual SOPR for LTH.
The spent production profit ratio (SOPR) is calculated by dividing the realized value (in USD) by the value at creation (USD) of the spent production. In other words, it is a simple ratio between the selling price and the buying price of the coins.
By considering the two moving averages for the monthly and yearly periods, the market can be divided into two periods. When monthly profitability exceeds annual profitability (orange), the market enters an overheated state. This is when LTHs spend more and get higher and higher returns. Conversely, when the monthly profitability is lower than the annual profitability (red), it suggests that an extended bear market is underway and LTH earnings are down or incurring losses.
It should be noted that the current bear market has been ongoing – according to the chart above – since June 2021. Thus, the all-time high of $69,000 in November 2021 was reached during the bear market – taking into account the relationship of LTH SOPR indicators.
Moreover, the red period has already lasted for almost 400 days, which is close to the bear market of 2018-2019. But still, the depth of the decline in the 30-day moving average of the LTH SOPR (red) is getting closer and closer to the January 2019 lows. The chart has also already fallen well below the March-April 2020 lows .
Long Term Holders – The Surrender Continues
Another indicator of the condition of long-term holders seems to confirm the above data. With Bitcoin falling below $20,000 in mid-June 2022, the so-called LTH capitulation has been reached. This means that the price of BTC has fallen below the costs of long-term holders (green zone).
Earlier in its history, Bitcoin experienced 3 periods where LTHs decided to sell their coins below the buy cost. This happened during the lows of all three historical bear markets: 2012, 2015 and 2018-2019. If history is any indication here, chances are the $20,000 area will serve as the current bear market low. Thus, the $17,500 reached in June would be the Bottom of Bitcoin.
STH cost base
It’s always worth taking a look at any of the indicators for short-term bitcoin holders. Their losses, when they entered the market several months ago, are much higher than those of LTH.
The cost basis chart for STH shows their realized price, or the level at which they bought BTC on average (pink). It is currently trading at around $28,000. The lower the base cost of the STH, the lower the selling pressure for the market.
The $28,000 area, on the other hand, could be a strong resistance area as many STHs will decide to sell their coins to break even. Moreover, this level remains in confluence with the technical resistance areas of this range. Additionally, the CME gap triggered by the mid-June declines remains in the $27,600-$28,600 area.
For the latest Bitcoin (BTC) analysis from Be[in]Crypto, click here.
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