Bitcoin (BTC) On-Chain Analysis – How Are Long-Term Holders Reacting?

Bitcoin Invalidates $18,000 Support

Following signals of insolvency and then bankruptcy of the FTX exchange, Bitcoin price (BTC) penetrated and then invalidated the former bear market floor, located around $18,000.

Plunging a large base of holders into a state of latent loss, the fall in price caused a wave of panic that pushed BTC down to the $16,000 levelwhere the Balanced Price sits, which had already served as support for the June 2022 price drop.

Figure 1: Daily price of BTC

The cohort of long-term holders has shown notable responsiveness compared to the May and June 2022 surrender events, shedding almost 60,000 BTC over the past week.

With a loss realization approaching -50%, this group, though known for its price insensitivity, has caused the 4th strongest wave of UTXO rejuvenation of the current bear cycle.

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BTC bounces off the balanced price

Over time, the price of BTC has historically encountered three distinct on-chain support levels:

• Realized Price (in yellow), which aggregates the price of all UTXOs circulating on the network at their last movement;
• The Balanced Price (in green) calculates the difference between the realized price and the transferred price (price weighted according to the Days of Parts Destroyed). It can be thought of as a form of “fair value” model of price, capturing the difference between what was paid (realized), and what was spent (transferred);
• The Delta Prize (in purple) is a “half-fundamental, half-technical” hybrid price model, calculated as the difference between the realized price and the all-time average price.

Figure 2: Spot, Realized, Breakeven and Delta Price

In previous cycles, most of the floor formation process took place between the Realized Price and the Equilibrated Pricewhile the lows were all set by a volatile wick reaching the Delta price.

Currently, we can note that the spot price bounces for a second time on the balanced pricefollowing a first test in June 2022, at the former support level of $18,000.

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Notable Expenditure by Former UTXOs

If the loss of support at $18,000 facilitated the redistribution of many BTCs, it is relevant to highlight the significant rejuvenation phase that coincided with this event.

In effect, a peak of nearly 2.4 million Days of Coins (JP) destroyed was recorded within the past weekindicating that many positions held for a long time have been spent.

Figure 3: Days of Parts Destroyed

This period of rejuvenation concurrent with a decline of at least 20% in the price of BTC is reminiscent of the bloody declines of May and June 2022 and indicates that the drop in price has not only impacted short-term holders, but the market as a whole.

By separating the spending volume of a given period by age bands, we can observe the relative spending behaviors of young coins (less than 6 months old) and old coins (older than 6 months)

Thus, the following graph measures the relative share of the volume of expenditure associated with old coins, held by long-term holders.

Figure 4: Age bands of BTC volume spent (greater than 6 months)

It then appears that the loss of the $18,000 support caused the 4th strongest wave of UTXO rejuvenation in the current bear cyclein terms of relative weight.

This means that some long-term holders participated in the redistribution dynamics in a strong way and did indeed give in to the selling pressure.

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Long-term holders let go

By measuring the supply held by the cohort of long-term investors (LTH), we can highlight the spending behavior whose traces we have just identified.

The following graph shows the supply of LTH (orange), as well as the daily variation of this measure (purple). Here, a drop of nearly 60,000 BTCbeginning on October 7 and continuing to this day is clearly identifiable.

Figure 5: Supply of long-term holders and daily variation

Moreover, it appears that outflows from LTH wallets occurred at a rate of approximately 15,000 BTC to 20,000 BTC per daywhich is still a lower throughput than during the price capitulation events of May and June 2022.

In sum, this cohort of holders liquidated nearly 0.43% of their holdings during the recent decline, a less pronounced shedding phrase that indicates that, despite selling pressure, LTHs are not inclined to break away. of their BTC at the price levels below.

Finally, it appears that, compared to previous bear cycles, the cohort of long-term investors currently hold a lower loss supply volume, both on a relative and absolute basis.

In effect, nearly 42.8% of the 5.95 million BTC held by LTH is currently smoldering a latent loss, representing approximately 2.54 million of BTC.

Figure 6: Supply of long-term holders at a loss (absolute and relative values)

During the bear market of 2015 – 2016, the supply held at a loss by this cohort had reached an all-time high of 2.82 million BTC.

This gradual improvement in the long-term profitability of BTC over recent bear cycles is partly explained by the increasing likelihood of old coins being held across bear markets (HODLing behavior and loss of wallet access). .

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Summary of this on-chain analysis

In sum, this week’s data indicates that following the invalidation of the $18,000 floor, the fall in price caused the redistribution of more than 600,000 BTC.

The spot price once again came to reach the balanced pricewhich serves as historical on-chain support for BTC declines during bear markets, with the delta price as the last defense.

With a large share of spending volume over the last seven days being associated with UTXOs older than 6 months, it appears that the drop in the spot price towards the $16,000 level pushed some long-term (LTH) holders to sell.

In effect, nearly 60,000 BTC, or nearly 10% of total redistribution volume, exited LTH walletswith a pace and magnitude, however, lower than during the capitulation events of May and June 2022, and a profitability of around -50%.

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Sources – Figures 2 to 8: Glassnode

On-chain analyst, fervent fighter of informational asymmetry.

My goal is to inform everyone about the state of Bitcoin (as an asset and a distributed network) through the prism of on-chain analysis.