Original title: Touching Distance
Original authors: UkuriaOC, CryptoVizArt, Glassnode
Original source: https://insights.glassnode.com/the-week-onchain-week-48-2024/
Translated by: Tom, Mars Finance
After multiple historic highs (ATH), Bitcoin's price is just a step away from $100,000. Explosive price movements often significantly increase holders' unrealized profits, and long-term holders (LTH) are accelerating the distribution of their bitcoins in response to this trend.
Summary
As the price of Bitcoin skyrockets to $100,000, long-term holders have distributed over 507,000 bitcoins, a number that, while lower than the 934,000 bitcoins at the March 2024 ATH, is still significant.
Long-term holders are cashing in on significant profits, with daily realized profits reaching a new high of $2.02 billion.
When analyzing the distribution subjects, most of the selling pressure comes from bitcoins held for 6 months to 1 year.
Intense Distribution by Long-Term Holders
After Bitcoin's price continues to set historic highs, the current price is approaching the highly anticipated $100,000 level. As in previous cycles, the long-term holder group is taking advantage of capital inflows and increased demand, massively resuming the distribution of their Bitcoin supply.
Since the peak of long-term holders' supply in September, this group has distributed 507,000 bitcoins. Although this scale is less than the 934,000 distributed during the March 2024 ATH, it remains significant.
By analyzing the percentage of total supply shifted from profit positions by long-term holders, similar conclusions can be drawn. Currently, the average daily distribution is 0.27% of the long-term holders' supply, with only 177 trading days in history having a distribution rate higher than this level.
It is worth noting that the current distribution rate of long-term holders is relatively higher compared to the March 2024 ATH, indicating that this distribution activity is more aggressive.
By using the 'liveliness' metric of long-term holders, we can assess the balance between coin day creation and destruction. Generally, an increase in liveliness indicates increased spending activity, while a decline suggests that holding behavior is dominant.
Although the current supply distribution rate exceeds that of the March peak, the amount of coin days destroyed remains lower than the March peak. This indicates that the bitcoins currently being traded by long-term holders are mostly recently acquired (e.g., the average age is more likely to be 6 months rather than 5 years).
Locking in Profits
Long-term holders play a key role in the price discovery process as they are an important source of reintroducing dormant supply into circulation. As the bull market progresses, it becomes increasingly important to assess the profit level of this group, as rising prices will spur increased activity.
Currently, long-term holders have realized daily profits of up to $2.02 billion, setting a new record that surpasses the March record. Absorbing this oversupply requires strong demand-side support, and the market may need to undergo a period of reaccumulation to fully digest.
When assessing the balance of realized profits and losses for long-term holders, we can see that the ratio of both accelerated rapidly in November. This result is due to the fact that, in the current price discovery phase, there is almost no supply that is at a loss for long-term holders.
Historically, as long as there is a large and stable inflow of new demand, prices typically remain in a frenzy for several months.
The Sell-Side Risk Ratio is used to assess the total profits and losses realized by investors relative to the total size of the asset (measured by realized market cap). This metric can be interpreted according to the following framework:
High values indicate that investors have realized significant profits or losses relative to their cost basis, which usually means the market needs to find a new balance, often accompanied by highly volatile price movements.
Low values indicate that most coins are traded at prices close to the cost basis, suggesting that the market has reached a certain level of balance, which usually reflects the exhaustion of 'profits and losses' within the current price range, accompanied by a low volatility environment.
Currently, the sell-side risk ratio is close to the high value range, suggesting significant profit-taking behavior within the current price range. However, the current reading is still far below the terminal values of previous cycles. This indicates that previous bull markets were still able to absorb sufficient demand under similar distribution pressures.
Composition of Distribution Behavior
After confirming a significant increase in the profit-taking behavior of long-term holders, we can further explore the composition of the distributed supply through more refined analysis.
By analyzing realized profit data segmented by holding periods, we can assess which subgroup contributes the most to sell-side pressure. Since November 2024, we have calculated the cumulative profit amounts for each time period:
6 months to 1 year: $12.6 billion
1 year to 2 years: $7.2 billion
2 years to 3 years: $4.8 billion
3 years to 5 years: $6.3 billion
Over 5 years: $4.8 billion
Among them, bitcoins held for 6 months to 1 year contribute the most to the current sell-side pressure, accounting for 35.3%.
This result indicates that most of the selling comes from bitcoins acquired recently, while long-term investors are behaving more cautiously, possibly waiting for higher prices. One might argue that these selling volumes describe a 'swing trading' style investor behavior, where they bought in after the ETF launch and plan to profit and exit in the next market surge.
The same approach can also be used to analyze the scale of realized profits by all investors, categorized by profit percentage:
0%-20%: $10.1 billion
20%-40%: $10.7 billion
40%-60%: $7.3 billion
60%-100%: $7.2 billion
100%-300%: $13.1 billion
300%+: $10.7 billion
Notably, the profit distribution among these groups is relatively uniform. This can be seen as a manifestation of a 'batch cashing out' strategy, where low-cost basis investors achieve similar dollar profits by selling fewer coins.
Specific observations from the coins acquired in 2021, 2022, and 2023 reveal that spending behavior during the peak period in March covered the coins acquired in these years. However, in the current rebound, spending is mainly concentrated on coins acquired in 2023, while coins from 2021 and 2022 have only just begun to increase selling pressure. This result is again consistent with a possible explanation for a 'swing trading' style profit strategy.
Sustainability Assessment
To assess the sustainability of this upward trend, we can compare the current unrealized profit distribution (URPD) structure with the distribution during the March 2024 ATH period.
During the peak in March 2024, with price appreciation after the ETF launch for several months, supply frequently changed between several supply clusters at $40,000 to $73,000. The subsequent seven months of volatile price movements made this area one of the most important supply clusters in history.
As supply is reaccumulated, this area becomes the starting point for the current rebound.
Fast forward to today, the market has rebounded so quickly that very few coins have changed hands between $76,000 and $88,000. We can draw two key conclusions from this:
1. Price discovery is a process that requires rebounds, pullbacks, and consolidations to confirm new price ranges.
2. Below $88,000, there exists some 'gap'; if the market adjusts and falls back before attempting to break through $100,000 again, this area may become a focal point.
In the current price discovery phase, changes in supply distribution can provide insights into hotspots of supply and demand.
Summary and Conclusion
Supported by soaring prices, long-term holders are massively distributing bitcoins, locking in profits of up to $2.02 billion. This behavior has led to an oversupply, and the market needs to absorb these sell-offs to sustain the price rise.
When analyzing the distribution subjects, most of the selling pressure comes from bitcoins held for 6 months to 1 year. This indicates that longer-term holders may still be waiting for higher prices before selling.
Disclaimer: This article does not provide any investment advice. All data is for reference and educational purposes only; any investment decisions must be made at your own risk.
