Editor's Note
This report is translated from glassnode's (Touching Distance). Bitcoin price is approaching the historic milestone of 100,000, and market dynamics are entering a feverish phase. This article delves into the allocation behavior of long-term holders, revealing how they lock in profits during price increases. Since supply peaked in September, long-term holders have allocated 507,000 Bitcoins, achieving a record daily profit of $2.02 billion, demonstrating the market's strong reliance on liquidity and demand.
Interestingly, the main selling pressure comes from investors who have held the currency for 6 months to 1 year, while senior holders who have held the currency for longer appear to be more cautious or waiting for higher prices. This spending behavior illustrates the complexity of the current market - how will the struggle between excess supply and influx of demand affect future trends? This article uses rich on-chain data and in-depth structural analysis to reveal the key driving forces behind the market and provide you with a comprehensive and profound investment perspective.
Highlights
As the price of Bitcoin heads towards 100,000, long-term holders are beginning to disperse over 507,000 Bitcoins, which is still less than the 934,000 Bitcoin sellers in the March rally, but still significant.
Long-term holders are locking in massive profits, hitting a new all-time high of $2.02 billion in daily realized profits.
When assessing the composition of the spending entity, most of the sell-side pressure appears to be coming from coin age between 6 months and 1 year.
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Strong long-term holder allocation
After hitting multiple new all-time highs in a row, Bitcoin price is now approaching the impressive and long-awaited value of 100,000 per coin. As in all previous cycles, long-term holders are taking advantage of the influx of liquidity and the strengthening demand side to begin a massive redistribution of their holdings of supply.
This group has now been allocated a not inconsiderable 507,000 Bitcoins since the long-term holder supply peaked in September. This is a substantial amount; however, it is small compared to the 934,000 Bitcoins spent in the March 2024 ATH pull.
Figure source: glassnode real-time chart-Bitcoin: long-term/short-term holder threshold
We can see a similar picture by evaluating the percentage of the total supply that long-term holders traded from profitable positions. Currently, the average daily allocation of long-term holder supply is 0.27%, with only 177 days of trading history showing a heavier allocation rate.
Interestingly, we can observe that this relative allocation rate is larger than the March 2024 ATH, highlighting more aggressive allocation activity.
Chart source: glassnode real-time chart-Bitcoin: long-term holder spending as a percentage of held supply
We can also look at long-term holder activity metrics to assess the balance between Coinday creation (holding time) and Coinday destruction (elapsed holding time). Typically, an uptrend in activity is characterized by a high degree of spending activity, while a downtrend suggests HODL (hold for the long term) as the main dynamic.
Although the current supply distribution rate is higher than the peak in March, the amount burned by Coinday is still lower. This highlights that most of the long-term holder coins being traded are likely to have been acquired relatively recently (e.g., more likely to be 6 months old on average than 5 years old).
Picture source: glassnode real-time chart-Bitcoin: long-term activity
Lock in profits
Long-term holders play a key role in the price discovery process as they are the primary source of previously dormant supply re-entering the flow cycle. As a bull market progresses, it becomes more prudent to assess the extent of arbitrage in this group, as they tend to become increasingly active as prices rise.
Long-term holders are currently realizing massive profits of 2.02 billion per day, setting a new all-time high and surpassing the previous record set in March. Strong demand will be needed to fully absorb this oversupply, which may require a period of reaccumulation to fully absorb.
Chart source: glassnode Live Chart - Bitcoin: Realized Profit for Long-term Holders of Physical Adjustment [USD] (7-day Moving Average)
Assessing the balance between the amount of profits and losses realized by long-term holders, we can see that the ratio between the two accelerated rapidly in November. By definition, this is due to the lack of loss-making supply from long-term holders under this price discovery mechanism.
Historically, prices have remained in a frenzy for months, assuming a large and sustained influx of new demand.
Chart source: glassnode Live Chart-Bitcoin: Long-term holders realized profit/loss ratio
seller risk ratio
The sell-side risk ratio evaluates the total amount of realized profits and losses an investor has locked in relative to the size of the asset (assessed by realized market capitalization). We can consider this metric based on the following architecture:
High values indicate investors are spending coins at a significant profit or loss relative to their cost basis. This situation indicates that the market may need to re-find its balance and often occurs after a high-volatility price move.
A low value indicates that most coins are spent close to their break-even point, indicating that some level of equilibrium has been reached. This situation usually means that "profits and losses" have been exhausted in the current price range, and usually describes a low-volatility environment.
Sell-side risk ratios are approaching high territory, suggesting substantial arbitrage is occurring within the current range. However, current readings are still well below the terminal values reached in previous cycles. This suggests that previous bull markets have seen enough demand to absorb supply, even under similar relative allocation pressures.
Chart source: glassnode real-time chart-Bitcoin: long-term holder seller risk ratio
Expenditure composition
Having established that long-term holder arbitrage has risen significantly, we can increase the precision of this assessment by carefully examining the composition of the sold supply.
We can use the age breakdown of realized profit metrics to assess which subgroups contribute the most to seller pressure. Here, we calculate the cumulative arbitrage volume by age since early November 2024.
Profit realized from 6 months to 1 year: 12.6 billion
Profit realized in 1 to 2 years: 7.2 billion
Profit realized in 2 to 3 years: 4.8 billion
Profit realized in 3 to 5 years: 6.3 billion
Profit realized over 5 years: 4.8 billion
Coins aged between 6 months and 1 year dominate the current selling pressure, accounting for 35.3% of the total.
The dominance of 6-month to 1-year-old coins highlights that most spending is coming from relatively recently acquired coins, suggesting that more sophisticated investors are remaining cautious and may be patiently waiting for higher prices. One could argue that these selling volumes may describe swing trading style investors who accumulated after the ETF launch and planned to just ride the next wave of market moves.
Source: glassnode Live Chart - Bitcoin: Cumulative Realized Profit by Age [November 2024]
Next, we can apply the same method to calculate the profit scale of all investors divided by the realized percentage return on investment rate.
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
Achieved profit of more than 300%: 10.7 billion
Interestingly, there is a degree of consistency across these groups, with all groups realizing similar proportions of profits. Arguably, this represents a “take chips off the table” strategy, where low-cost benchmark investors realize similar dollar profits by selling fewer coins over time.
Source: glassnode Live Chart - Bitcoin: Cumulative Realized Profit by Margin [November 2024]
Focusing specifically on coins purchased in 2021, 2022, and 2023, we can observe considerable and consistent spending behavior at the March peak.
However, in the current pull, spending is primarily made up of coins purchased in 2023, with coins in 2021 and 2022 only recently starting to add seller pressure. This is again consistent with a possible explanation for "swing trading" style arbitrage as the dominant strategy.
Source: glassnode Live Chart-Bitcoin: Capital Outflows by Date Range
Assess sustainability
To assess the sustainability of this upward trend, we can compare the current structure of the Unrealized Profit Distribution (URPD) with the structure at March 2024 ATH.
In March 2024, after months of appreciation following the ETF’s launch, supply changed hands in multiple supply clusters between 40,000 and 73,000 ATH. Over the course of the subsequent seven months of volatile price action, this area became one of the most important supply clusters in history.
As supply is re-accumulated, it forms the final support where this pull begins.
Chart source: glassnode Live Chart - Bitcoin: Unrealized Realized Profit Distribution of Entity Adjustments [BTC] - March 13, 2024
Fast forward to today, and the market is rising so quickly that very few coins are changing hands between 76,000 and 88,000. Two key observations can be made from this:
Price discovery is a process that requires pulls, pullbacks, and consolidation to confirm new price ranges.
There is an "air gap" below 88,000, which could become an interesting area if the market pulls back before re-attempting above 100,000.
As the market attempts to re-find equilibrium in this price discovery mechanism, changes in supply allocation can provide insight into areas of interest for supply and demand.
Figure source: glassnode real-time chart - Bitcoin: Entity-adjusted unrealized profit distribution [BTC]
Summary and conclusion
Backed by strong price action, long-term holders are allocating the coin meaningfully, locking in massive $2.02 billion in profits. This has created a supply glut that must be absorbed to accommodate continued price increases.
When assessing the composition of spending entities, most sell-side pressure appears to be coming from coins aged between 6 months and 1 year. This highlights that more sophisticated entities may require higher prices to unlock the potential of their coins.
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[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
"The Week Onchain" Week 48: Looking at the bull market from the data, Diamond Hands made 2 billion magnesium! 』This article was first published in "CryptoCity"
