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Long-term Bitcoin holders buy back after sell-off

The fundamental laws of supply and demand determine the price movement of any asset, including Bitcoin. When supply exceeds demand, the price of an asset tends to fall. Conversely, when demand exceeds supply, the price generally increases.

These same principles apply to... Cryptocurrencies Other on-chain metrics can provide valuable insights into the behavior of Bitcoin holders.

The Impact of Increased Profit Taking on the Bitcoin Market

When analyzing Bitcoin Market Long-term bullish price action typically shows large upward swings, mixed with periods of corrections and consolidation. Most investors know that financial markets do not rise constantly, resulting in a dynamic interaction between supply and demand, leading to periodic corrections.

This trend is evident when looking at the maximum Bitcoin made and the profits made.

  • Maximum reached: This adds the value of all BTC based on the price when they were last transferred. Which gives a more precise idea of ​​the money actually invested in BTC.

  • Benefits earned: These are the actual gains made by BTC holders when they sell their coins for more than they paid for them.

with Bitcoin hits new all-time high At over $73,000 in mid-March, the realized high also increased, suggesting that most long-term holders were profitable. As a result, some liquidated their positions, leading to a significant increase in profits made.

Maximum Bitcoin Earned and Profits
Bitcoin has reached its peak and profits. Source: Glass knot

The growing supply of BTC in the market has exceeded demand levels. Which led to a corrective phase that saw the Bitcoin price fall below $57,000. This drop caused BTC to fall below its realized price for its short-term holder, creating a sense of fear in the market, as short-term holders are more likely to sell based on price fluctuations.

  • Price achieved: The average price at which all BTC was last purchased. It’s like knowing the average cost everyone paid for their BTC.

  • Realized price for a short-term holder: The average price investors paid for the BTC they traded over the last 155 days. These BTCs are the ones most likely to be spent or sold soon.

  • Realized price for the long-term holder: The average price paid by investors for BTC that has not moved for more than 155 days. These bitcoins are the least likely to be spent or sold soon.

The holder's realized short price, currently at $60.5K, has served as an accumulation point despite investor concerns. In fact, long position holders felt comfortable adding more BTC to their positions at this level after the March earnings call.

Bitcoin On-Chain Cost Basis
Bitcoin on-chain cost basis. Source: Glass knot

Changing Bitcoin Supply and Demand Trends

The evolution of the BTC holder's net position over the long term provides insight into this behavior. After enduring a long distribution period, long-term holders began accumulating again. Having collected over 70,000 BTC since the beginning of May.

  • Evolution of the owner's long-term net position: It shows how the amount of Bitcoin held by long-term investors increases or decreases over time.

Based on the simple laws of supply and demand, as the demand for Bitcoin begins to outstrip the available supply of BTC in the market, the chances of the premier cryptocurrency resuming its upward trajectory improve.

Changing a Bitcoin Holder's Net Position
Change in Bitcoin holder’s net position. Source: Glass knot

Monitoring the balance of BTC on exchanges can confirm this supply and demand dynamic.

Since the beginning of May, more than 30,000 BTC have been transferred into private cryptocurrency wallets for long-term holding, demonstrating holders' confidence in the future value of BTC.

Bitcoin balance on exchanges
Bitcoin balance on exchanges. Source: Glass knot

While it can be difficult to gauge the future price movement of any asset, several on-chain metrics can hint at potential price levels that investors should pay attention to. One such measure is the price range for extreme deviations (MVRV), which determines whether... Bitcoin Price Exceptionally high or low compared to its historical averages.

  • MVRV: It represents the market value of the realized value. Market cap is the current price of Bitcoin multiplied by the number of BTC in circulation, while realized value is the average price at which all BTC were last purchased.

  • Price ranges: These bands show the upper and lower limits of the BTC price based on historical MVRV values ​​to help identify when BTC is significantly overvalued or undervalued based on historical price data.

Bitcoin recently returned above the +0.5σ price range, which currently stands at $64.6k. Historically, this rally has led BTC to test the 1.0σ price range supported by growing demand. This price range currently hovers around $77,000.

👈Read more: What is the impact of the news on the price of Bitcoin?

Bitcoin balance on exchanges
Bitcoin balance on exchanges. Source: Glass knot

Summary and conclusions

The fundamental laws of supply and demand dictate Bitcoin price movements. Indeed, prices decrease when they exceed Offer and demand It increases when demand exceeds supply. On-chain metrics provide valuable insight into these dynamics, allowing analysts to understand the behavior of BTC holders.

Recent data reveals prices falling below $57,000 as supply increases. However, long-term holders have shown confidence by accumulating over 70,000 BTC since the beginning of May. This trend indicates market resilience despite short-term fluctuations.

Key metrics such as realized cap and realized profits show that many long-term holders were profitable at Bitcoin's all-time high, triggering a wave of selling and...Price corrections suffix. However, the accumulation of long-term holders at lower prices indicates a positive outlook for the future value of BTC.

👈Read more: Will Bitcoin Reach a New High in 2024?

Overall, these on-chain metrics help identify changes in supply and demand, providing a framework for understanding Bitcoin price action and investor behavior and indicating potential upward trends as demand begins to exceed supply.

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