Bitcoin price has rallied by 21% over the past 7 days, reaching $52,000 for the first time since December 2021. The price surge is mainly attributed to the growing inflow into spot Bitcoin exchange-traded funds (ETF) reaching a peak of $631.3 million on Feb. 13. Traders are speculating whether over-the-counter (OTC) desks have depleted their coin reserves, leading them to resort to spot buying on regular exchanges and creating an unbalanced situation favoring bullish momentum.

While such a hypothesis is easy to believe and somewhat misleading, on-chain data from Glassnode shows a decrease in short-term holders' supply, and if conditions are sustained, Bitcoin price could rally above $55,000.

Short-term Bitcoin holders have been selling at a fast pace

It's essential to dispel the misconception that arbitrage desks are always net long (buyers), which implies that they have directional exposure to the price. While having a significant spot market position is crucial for their business, it is often hedged using derivative contracts. Similarly, not every OTC deal requires a buyer and seller, as intermediaries ca spot exchanges' order books and futures contracts to fulfill requests. In short, whether the arbitrage desk has a 'buffer' to immediately transfer coins or not does not alter the price dynamic.

Consequently, if spot Bitcoin ETF issuers added a net $1.84 billion BTC in the past week, other entities must have sold the same quantity. The crucial question for price formation is how desperate each side is to close the deal. Long-term holders, addresses that have not moved their coins in over 6 months, are typically less likely to sell after a price rally. This is why analysts turn to on-chain analysis to provide a rough idea of how resilient the market may be amid fluctuations as a gauge of investor strength and conviction.

Data indicates that short-term holders, addresses funded less than 6 months ago, significantly increased their transactions to exchanges by an average of 49,504 BTC per day in the past week. In comparison, long-term holders.#Write2Earn‬