March 28, 2024

Has the confidence of the Hodlers shaken?

After a volatile and difficult June, the price of Bitcoin has begun to consolidate around the level of the last cycleat around $20 thousand, which gave investors the opportunitypause and look around. In this article, we will assess whether there is a noticeable loss of investor confidence, especially long-term holders.

Working out the minima

There are several indicators that indicatethat the market is in the process of hitting a painful low, which is probably best described as capitulating and entering a period of re-accumulation.

General trend of active addresses metricsprovides us with a reasonably good roadmap for the progress of the BTC market structure. Bullish momentum is quite obvious (green), while bear markets tend to swing sideways or rise as the market recovers.

Active addresses were mostly permanent onaround ~800k per day and capped by the range of the bear market channel (red). This confirms the thesis that only hodlers remain. Thus, 2022 was a process of price correction towards the minimum level, for which their demand is enough to establish.

Number of active addresses (seven-day moving average) (updated source)

Previous bear market bottomswhile reducing profits by about 40-45%. In other words, more than half of the coins were at a loss. During the sell-off to $17.6K, the market did reach just under 50% of the supply in profit, which caused a significant capitulation and redistribution of coins (covered last week).

The end result of this redistributionis that a large amount of BTC has changed hands below the $20k mark. If we consider ~40-45% supply in profit as a potential bear market low, how far does the price have to fall to cause another ~5- 10% offer?

Share of supply in profit (updated source)

In the URPD chart below, we can see thatabout 1.43 million BTC has changed hands between the recent low of $17.6k and the current price of $21.6k. This means that after the recent redistribution of supply and capitulation, a retest of the lows will lead to the loss of an equivalent amount of supply, as in time of previous bear market lows.

Distribution of UTXOs by Realization Price (URPD) (updated source)

The market structure of aSOPR also resembles an eventdeep surrender, when the average spent coin brought a loss of -7%. It can be argued that the previous early bearish phase includes both mid-2021 and all of 2022 as shown in blue, which is similar to the structure of 2018 and 2019.

Adjusted SOPR (seven-day exponential moving average) (updated source)

Has the hodler's trust been shaken?

During June, the offer of long-termof holders decreased by approximately 181.8 thousand BTC, as a result of which the overall balance returned to the level of September 2021. However, this represents only 7.16% of the supply that was added between March and October 2021. If this indicator continues to fall, it will signal further selling pressure and a potential deterioration in the confidence of long-term holders. However, stopping and even restoring would strongly contradict this idea.

Total supply held by long-term holders (updated source)

In the final section, we will try to evaluatewhether the conviction of the bitcoin hodlers has been shaken, given that they are the last line of defense. We do this by estimating the age of the coins to be spent according to the following thesis:

  • if long-term holders who spendcoins are mostly from the 2021-2022 cycle, this is likely to be a classic capitulation, as investors holding coins at a loss due to high volatility finally give up;
  • if the long-term holders who spend the coins are in the pre-2020 cycle, this most likely reflects a widespread loss of conviction among bitcoin's strongest and longest-serving proponents.

Next, we find out which subset of long-termholders are putting pressure on coin spending of 181.8k BTC by looking at older age groups to distribute the approximate weight of each cohort.

The chart below showsoffer of coins older than 6 months. This offer decreased by 168.5 thousand BTC in June. Considering the threshold for long-term holders is ~5 months, this means that an estimated 13.3k spent BTC was spent 5-6 months ago, which is about 7.3% of the total supply.

Coin offer, older than 6 months (updated source)

For coins older than one year, this indicatordecreased from 65.72% to 64.93% of the circulating supply, which is equivalent to 150.7 thousand BTC. Thus, about 9.8% of coin spending by long-term holders is for coins 6 to 12 months old.

Continuing with this logic, we see thatspending coins older than one year is about 82.9% of the BTC spent by long-term holders, accounting for the lion's share of spending during the June capitulation.

Share of coin supply last active more than a year ago (updated source)

However, if we consider the proposal, whichwas last active over two years ago, it can be seen that it has more or less stabilized at 44.5% of circulating supply since April 2022.

Thus, we can conclude that out of 181.8 thousand BTC spent by long-term holders, approximately:

  • 82.9% are coins aged from one to two years,
  • 9.8% - 6-12 months,
  • 7.3% - 5-6 months.

Thus, our conclusion is thatthe recent capitulation of long-term holders is driven almost entirely by investors in the 2020-2022 cycle and most likely represents a classic capitulation event rather than a loss of conviction from very long-term BTC investors.

Share of coin supply last active more than two years ago (updated source)

Based on current price positioningbitcoin relative to historical low patterns, the market is already at extremely unbelievable levels, with only 0.2% of trading days under similar circumstances. Long-term holders experienced a long overdue but seemingly classic capitulation in June, driven largely by investors in the 2020-2021 cycle.

 

BitNews disclaim responsibility for anyinvestment recommendations that may be contained in this article. All the opinions expressed express exclusively the personal opinions of the author and the respondents. Any actions related to investments and trading on crypto markets involve the risk of losing the invested funds. Based on the data provided, you make investment decisions in a balanced, responsible manner and at your own risk.

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