On-chain discipline is proving to be an increasingly powerful tool for understanding network psychology and navigating the stages of Bitcoin cycles — which, despite the peculiarities of each cycle, continue to follow a very similar fundamental pattern.

Comparing with the last cycle, the current behavior of holders harks back to December 2020, which preceded the most accelerated phase of the expansion stage.

Smart Money: As the market begins to enter a period of euphoria, we observe long-term holders moving their coins more intensively. Currently, LTHs are reducing their supply by an average of 16,800 Bitcoins per day over the last month. In previous cycles, this distribution movement lasted approximately 7 months before transitioning to the bear market, indicating that we have already gone through approximately 50% of this process.

Profitability of New Entrants: While the more experienced investors sell, this pressure is absorbed by new entrants, who start to accumulate unrealized gains as the price rises — historically, volatility has been the biggest driver of greed among short-term holders, which has just begun to resurge in the market. Currently, the MVRV of short-term holders stands at 1.23, still far from the 1.80 band that marked the peak of the last two cycles.

Analyzing this dynamic, it seems there is room for a more significant rise in this cycle as liquidity expands with the increasing greed of STHs and experienced investors gradually realizing their profits.

Written by Gustavo Faria