Bitcoin LTH Supply Rises Again Amid Bearish Market Dynamics

The Bitcoin market experienced a shockingly dramatic weekend, as opposed to the typical silent price action displayed in previous weekends. On Saturday, January 31st, the world’s leading cryptocurrency seemingly led other crypto assets south of the charts, with its price falling from $84,350 to as low as $75,000 in a single swoop. 

As this unfolded, an inversely correlated shift also played out underneath the charts. A recent on-chain evaluation has pointed out that Bitcoin’s Long-term Holder behavior is changing, contrary to what its short-term holders are doing.

Pseudonymous on-chain analyst Darkfost recently took to CryptoQuant, via a Quicktake post, pointing out that Bitcoin’s long-term holders are racking up more BTC. The relevant indicator here is the LTH supply change (Coinbase fix).

For context, this metric tracks the net change in the amount of Bitcoin held by long-term holders (typically coins unmoved for ~155 days). According to the analyst, approximately 186,000 (on a monthly average) have been added to the Long-term holders’ supply.

Seeing as more coins are aging past 155 days, Darkfost implied that short-term holder supply is, in turn, witnessing steady contraction. Notably, the analyst pointed out this kind of transition (between long-term and short-term investors) last happened in April, as the Bitcoin price retraced. 

As it is intuitively evident, a rising LTH supply is typically interpreted as growing conviction among Bitcoin’s long-term investors. By extension, this means that long-term holders are distributing less of their holdings and stowing away more. 

In theory, this behavior is bullish news for the cryptocurrency. This is because, as LTHs absorb supply, the amount of available Bitcoin for sale reduces. Historically, it is also a bullish signal for the BTC price, as it has often appeared during the early stages of accumulation periods or late into correction stages.

However, the broader market implications in the current context might not be so favorable. Darkfost highlighted that there is very weak demand available to cushion the falling BTC price. 

At the same time, the Bitcoin market appears to be entering a bearish phase; hence, it is not far-fetched to see major capitulation events in the near-term. If this happens, the Bitcoin price would likely plummet, as weaker investors may sell off their holdings in fear or as victims of liquidation events.

For a bullish outlook to be truly relevant, there has to be a clear recovery in demand, alongside continued long-term holder accumulation. 

As of press time, the Bitcoin price stands at approximately $78,060, reflecting a 6.9% loss in the past day.