Original title: Touching Distance
Original author: UkuriaOC, CryptoVizArt, Glassnode
Original translation: Baishui, Golden Finance
summary
As Bitcoin price rallied toward $100,000, long-term holders began allocating more than 507,000 BTC, which is still less than the 934,000 BTC sellers saw during the March rally, but still significant.
· Long-term holders locked in a significant amount of profits, setting daily realized profits to a new ATH of 2.02B.
When assessing the composition of physical spending, the majority of sell-side pressure appears to be coming from tokens between 6 months and 1 year old.
Long-term holders are densely distributed
After a series of continuous new ATHs, the price of Bitcoin is now within striking distance of the impressive and long-awaited price of $100,000 per coin. As in all previous cycles, the long-term holder community is taking advantage of the liquidity inflow and the strengthening demand side to resume large-scale allocation of the held supply.
Since LTH supply peaked in September, this group has now sold 507,000 BTC. This is a sizeable amount; however, it is small relative to the 934,000 BTC sold during the ATH rally in March 2024.
We see a similar picture by assessing the percentage of total supply that is traded from profitable positions by long-term holders. Currently, an average of 0.27% of LTH supply is sold each day, with only 177 trading days showing a higher selling rate.
Interestingly, we can observe that the relative rate of LTH spending is higher than the ATH in March 2024, highlighting more aggressive selling activity.
We can also refer to the LTH Vitality metric to assess the balance between coinday creation (holding time) and coinday destruction (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 primary driver.
While the current supply distribution rate is greater than the March peak, Coinday’s burns are still low. This highlights that most LTH token transactions are likely to have been acquired recently (e.g., more likely 6 months than 5 years on average).
Profit Lock
Long-term holders play a key role in the price discovery process as they are the primary source of previously dormant supply returning to liquidity circulation. As the bull market progresses, it becomes more prudent to assess the extent of profit-taking by this group as they tend to become increasingly active as prices rise.
Long-term holders are currently realizing profits of up to $2.02B per day, setting a new ATH, surpassing the new ATH set in March. A strong demand side is needed to fully absorb this supply glut, which may require a period of re-accumulation to be fully absorbed.
Assessing the balance between LTH’s profit and loss volumes, we can see that the ratio of the two rapidly accelerated in November. By definition, this is due to the lack of LTH supply during this price discovery mechanism, resulting in losses.
Historically, prices have remained bullish for several months, assuming a large and sustained inflow of new demand.
The sell-side risk ratio assesses the total amount of realized profits and losses locked in by an investor relative to the size of their asset (measured by realized cap). We can think of this metric in the following framework:
High values indicate that investors are spending tokens 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 will typically see high volatility price movements.
Low values indicate that most tokens are spending relatively close to their breakeven cost basis, indicating that a degree of equilibrium has been reached. This situation usually means that "profits and losses" within the current price range have been exhausted and generally describes a low volatility environment.
The seller risk ratio is approaching the high range, inferring that significant profit-taking is occurring within the current range. Nevertheless, the current reading remains significantly lower than the final values reached in the previous cycle. This suggests that previous bull markets had enough demand to absorb the supply even under similar relative selling pressure.
Expenditure composition
After identifying a significant rise in profit-taking by long-term holders, we can increase the granularity of our assessment by carefully examining the composition of the supply being sold.
We can use the age breakdown of the realized profits metric to assess which subgroups contribute most to the sell-side pressure. Here, we calculate the cumulative profit-taking volume by time since the start of November 2024.
· Profit in 6 months-1 year: $12.6 billion
Profits in 1-2 years: $7.2 billion
Profit in 2-3 years: $4.8 billion
Profits in 3-5 years: $6.3 billion
Profits over 5 years: $4.8 billion
Tokens with a time horizon between 6 months and 1 year dominate the current sell-side pressure, accounting for 35.3% of the total.
The dominance of tokens aged between 6 months and 1 year highlights that most of the spending came from recently purchased tokens, which highlights that more long-term investors remain cautious and may be patiently waiting for higher prices. One could argue that these sales volumes may describe swing trading style investors who accumulated funds after the launch of the ETF and plan to ride the next market wave.
Next, we can apply the same methodology to the size of profits realized by all investors and categorize them by the percentage of ROI locked in.
0%-20% Profit: $10.1 billion
20%-40% profit: $10.7 billion
40%-60% profit: $7.3 billion
60%-100% profit: $7.2 billion
100%-300% profit: $13.1 billion
300%+ Profit: $10.7 billion
Interestingly, there is a degree of consistency across these groups, with all groups representing similar proportions of the total. Arguably, this represents an “unrealistic” strategy where investors with a lower cost basis achieve similar dollar profits by selling fewer tokens over time.
Looking specifically at tokens purchased during 2021, 2022, and 2023, we can observe significant and sustained spending behavior during the March peak.
However, in the current rally, the selling has mostly consisted of tokens purchased in 2023, while tokens purchased in 2021 and 2022 are only beginning to increase their seller pressure. This is again consistent with the possible explanation of “swing trade” style profit taking as the dominant strategy.
Measuring sustainability
To gauge the sustainability of this upward trend, we can compare the current structure of URPD to the structure experienced during the March 2024 ATH.
In March 2024, following a few months of appreciation following the ETF launch, several supply clusters changed hands between $40,000 and $73,000. In the seven months of price action that followed, this area became one of the most significant supply clusters in history.
As supplies reaccumulated, it formed the final support from which this rally began.
Fast forward to today, and the market has rebounded so quickly that very few BTC are changing hands between $76,000 and $88,000. From this, two key observations can be determined:
Price discovery is a process that often requires rallies, corrections, and consolidations to confirm a new price range.
There is something of an “air gap” below $88,000 which could become an area of interest if the market pulls back lower before retrying to break through $100,000.
As the market attempts to re-find equilibrium in this price discovery mechanism, changes in the supply distribution can provide insight into supply and demand areas of interest.
Summarize
On the back of rising prices, long-term holders are selling. This creates a glut of supply that must be absorbed to accommodate continued price increases.
When assessing the composition of entity spending, the majority of the sell-side pressure appears to be coming from BTC between 6 months and 1 year old. This highlights the potential for further selling from older entities, which would require higher prices to sell their BTC.
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