On-Chain Analytics Show That Long Term Holders Are At a Multiyear High

GB Market Commentary 2/02/2022

by Marcus Sotiriou

Whilst Bitcoin remains in this downtrend, on-chain analytics show that these prices could be lucrative for the long-term investor. Firstly, Bitcoin has reached the 4th most oversold point in its history when looking at dormancy flow, shown by data from Glassnode. High values for dormancy flow mean that old coins are moving. Extremely low values, like we are seeing currently, show that most of the coins being transacted are young, suggesting that short term holders are capitulating whilst long term holders are holding / accumulating. Historically, values between 150,000 to 250,000 have marked the sign of bottoms before incredible rallies – currently, the dormancy flow is around 200,000.

Bitcoin: Entity-Adjusted Dormancy Flow - 02/02/22

This data is supported by the supply held by ‘strong hands’ (meaning long-term holders) which has hit an all-time-high of 76%. According to Glassnode we have reached the largest gap between long term holders and short-term holders in Bitcoin’s history. In addition, the percentage of Bitcoin on exchanges continues to decrease. Since the all-time-high at $69,000, Glassnode shows that 42.9k Bitcoin has left exchanges.

Bitcoin: Balance on Exchanges - 02/02/22

All these indicators suggest that as price has decreased by over 50% over the past few months, whales have been accumulating, whilst short term holders capitulating. MicroStrategy are one example of institutions adding to their Bitcoin stack during this downtrend, as CEO Michael Saylor announced another $25 million purchase yesterday for an average price of $37,865. I think there is significant demand within this $30k-$40k range and we will continue to see long term holders build up their positions in preparation for the next rally.