Key Notes
- There is an ongoing imbalance between LTH and STH reactions to Bitcoin.
- Generally, long-term holders profit from new investors scooping up BTC.
- Bitcoin balance on exchanges is falling, signaling liquidity shock.
According to market data, Bitcoin
BTC
$97 631
24h volatility:
0.6%
Market cap:
$1.93 T
Vol. 24h:
$56.62 B
trades around $94,500. This marks a 13% drop from its All-Time High (ATH) of roughly $108,000. This latest price correction is the most significant since early November, following the U.S. elections and President-elect Donald Trump’s victory.
Market analysts recently hinted that Bitcoin’s Long-term holders (LTHs) and Short-term Holders (STHs) play a big role in the current price movement. This is because their buying and selling decisions influence the market dynamics.
The Role of LTHs and STHs in Bitcoin Bearish Trajectory
Long-term holders are investors who have held Bitcoin for at least 155 days as reported by Coindesk. Historically, these holders have accumulated large amounts of BTC when prices were lower. They tend to sell their assets when the price spikes.
According to Glassnode, the analytics firm tracking blockchain data, LTHs have constantly offloaded their Bitcoin. In the last few months, LTHs reduced their total holdings from around 14.2 million BTC in mid-September to approximately 13.2 million BTC by December.
One of the largest sell-offs occurred last Thursday, with LTHs selling nearly 70,000 BTC in a single day. This transaction marked the fourth largest sell-off recorded this year. Such sell-offs have contributed to downward pressure on the price as more Bitcoin enters the market during high price volatility.
For every seller, there is a buyer. Short-term holders (STHs) have held Bitcoin for less than 155 days. These traders have taken advantage of the recent price dip to buy more coins. STHs have added about 1.3 million BTC to their holdings in the past few months.
These buyers are picking up some of the Bitcoin that LTHs are selling. However, their demand is not enough to offset the selling pressure from long-term holders fully. The imbalance of more selling than buying has driven Bitcoin’s price down. This has potentially caused 10% of the flash drops in Bitcoin’s active wallets.
Bitcoin’s Circulating Supply and Exchange Dynamics
The overall supply of Bitcoin and its movement on exchanges also play a key role in the market. These factors, alongside the behavior of LTHs and STHs, significantly influence Bitcoin’s price. Currently, there are 19.8 million Bitcoin in circulation, with another 2.8 million BTCs held in exchanges.
Interestingly, the amount of Bitcoin sitting on exchanges has steadily declined. Reportedly, around 200,000 BTC has left exchanges in recent months. This reduction in exchange reserves could signal less market liquidity, further contributing to price volatility.
Bitcoin’s decreasing exchange supply could indicate investors holding their BTC in wallets. Speculatively, this could be in anticipation of future price movements or response to concerns over market fluctuations.
With fewer Bitcoin available for trading on exchanges, the overall liquidity in the market decreases. This has made the asset more susceptible to price swings when large transactions occur.
With the current market performance, it is seen that the market is caught in a delicate balance. The recent price dip results from this shift in supply and demand dynamics. However, the outlook for Bitcoin remains uncertain.
Some analysts believe the market correction could be temporary, with Bitcoin potentially recovering as more buyers enter the market. Others, however, warn that the selling pressure from LTHs could continue. This is especially true if the broader macroeconomic environment remains uncertain.
Nevertheless, experts urged participants tracking Bitcoin’s price movements to watch out for the behavior of LTHs and STHs investors.
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Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
