Authors: UkuriaOC, CryptoVizArt, Glassnode; Translated by: Bai Shui, Golden Finance
Summary
As Bitcoin's price rises to $100,000, long-term holders have started distributing over 507,000 BTC, although still below the 934,000 BTC sold during the March surge, it is still significant.
Long-term holders have locked in a considerable amount of profit, setting the daily realized profit at a new ATH of $2.02 billion.
When assessing the composition of entity expenditures, most of the selling pressure seems to come from tokens held for 6 months to 1 year.
Long-term holders are densely distributed
After a series of continuous new ATHs, Bitcoin's price is now very close to the impressive and long-awaited price of $100,000 per coin. As with all previous cycles, the long-term holders are taking advantage of the liquidity inflow and enhanced demand to begin reallocating their held supply on a large scale.
Since the LTH supply peaked in September, this group has sold 507,000 BTC. This is a significant scale; however, it is smaller compared to the 934,000 BTC sold during the ATH rebound in March 2024.
By assessing the percentage of total supply traded from profitable positions of long-term holders, we see a similar situation. Currently, an average of 0.27% of LTH supply is sold daily, with only 177 trading days having a higher sale rate.
Interestingly, we can observe that the relative ratio of LTH spending is higher than during the ATH in March 2024, highlighting a more aggressive selling activity.
We can also refer to the LTH vitality metric to assess the balance between Coindays created (holding time) and Coindays destroyed (spent holding time). Typically, an upward trend in vitality is characterized by an environment of increased spending activity, while a downward trend indicates that long-term holding is the main driver.
While the current supply distribution rate is greater than the peak in March, the amount of Coindays destroyed remains low. This highlights that most LTH tokens traded were likely acquired recently (for example, more likely 6 months rather than 5 years).
Profit locking
Long-term holders play a key role in the price discovery process, as they are the main source of previously dormant supply returning to liquidity circulation. As the bull market progresses, it becomes increasingly prudent to assess the extent of profit-taking within this group, as they tend to become more active as prices rise.
Long-term holders are currently realizing profits of up to $2.02 billion per day, setting a new ATH, surpassing the new ATH set in March. Strong demand is needed to fully absorb this oversupply, which may require a period of reaccumulation.
When assessing the balance between LTH's profits and losses, we can see that the ratio of both accelerated rapidly in November. By definition, this is due to the under-supply of LTH during this price discovery mechanism that caused the losses.
Historically, assuming a large and sustained influx of new demand, prices are likely to remain optimistic for several months.
The seller risk ratio assesses the total amount of realized profits and losses locked by investors relative to the size of the asset (measured by realized cap). We can consider this metric within the following framework:
High values indicate that investors are spending tokens at significant profits or losses relative to their cost basis. This situation suggests that the market may need to re-establish balance, often leading to high volatility in price movements.
Low values indicate that most tokens' spending is relatively close to their breakeven cost basis, suggesting a certain degree of equilibrium has been achieved. This situation typically means that the 'profit and loss' within the current price range has been exhausted and usually describes a low-volatility environment.
The seller risk ratio is approaching a high value range, inferring that significant profit-taking is occurring within the current range. Nonetheless, the current readings are still significantly lower than the final values reached in previous cycles. This indicates that, even under similar relative selling pressures, previous bull markets had enough demand to absorb the supply.
Expenditure composition
After determining that long-term holders' profit-taking has significantly increased, we can enhance the granularity of the assessment by carefully examining the composition of the sold supply.
We can leverage the age segmentation of the realized profit metric to assess which subgroups contribute the most to selling pressure. Here, we calculate the cumulative profit-taking amount since November 2024.
6 months-1 year realized profit: $12.6 billion
1-2 years realized profit: $7.2 billion
2-3 years realized profit: $4.8 billion
3-5 years realized profit: $6.3 billion
More than 5 years realized profit: $4.8 billion
Tokens held between 6 months to 1 year dominate the current selling pressure, accounting for 35.3% of the total.
Tokens held for 6 months to 1 year dominate, highlighting that most spending comes from tokens purchased recently, which indicates that more long-term investors are still cautious and may be patiently waiting for higher prices. One might say that these sell-offs may describe investors with a volatile trading style, who accumulated funds after the ETF launch and plan to ride the next wave of the market.
Next, we can apply the same method to classify the sizes of profits realized by all investors, sorted by the percentage of locked returns.
0%-20% realized profit: $10.1 billion
20%-40% realized profit: $10.7 billion
40%-60% realized profit: $7.3 billion
60%-100% realized profit: $7.2 billion
100%-300% realized profit: $13.1 billion
300%+ realized profit: $10.7 billion
Interestingly, these groups show a degree of consistency, with proportions similar across all groups in total. It could be said that this represents an 'unrealistic' strategy, where investors with lower cost bases gain similar dollar profits by selling fewer tokens over time.
With a particular focus on tokens purchased during 2021, 2022, and 2023, we can observe a substantial and sustained spending behavior during the March peak.
However, during the current rise, the selling behavior primarily includes tokens purchased in 2023, while tokens purchased in 2021 and 2022 have just begun to increase their selling pressure. This again aligns with the possible explanation of 'swing trading' style profit-taking as the dominant strategy.
Measuring sustainability
To measure the sustainability of this upward trend, we can compare the current structure of URPD with the structure experienced during the ATH in March 2024.
In March 2024, after several months of appreciation following the ETF launch, the supply from several supply clusters changed hands between $40,000 and $73,000. During the subsequent seven months of price fluctuations, this area became one of the most significant supply clusters in history.
As supply is being reaccumulated, it forms the final support for the start of this round of rebound.
Fast forward to today, the market has rebounded so quickly that very few BTC have changed hands between $76,000 and $88,000. This leads to two key observations:
Price discovery is a process that often requires rebounds, corrections, and consolidations to confirm a new price range.
There exists some 'air gap' below $88,000, which could become an area of interest if the market retraces before attempting to break through $100,000 again.
As the market attempts to re-establish balance in this price discovery mechanism, changes in supply distribution can provide insights into areas of supply and demand of interest.
Summary
With the support of rising prices, long-term holders are selling. This has caused an oversupply that must be absorbed to accommodate the ongoing price increases.
When assessing the composition of entity expenditures, most of the selling pressure seems to come from BTC held for 6 months to 1 year. This highlights the potential for older entities to further sell their BTC, as they require higher prices to sell.
