An accelerating bull market usually correlates with an increasing influx of new investors. Short-term holders of Bitcoin (STH) – as the on-chain analysis calls them – join the market during the booming bull market. Driven by the desire for a quick profit, they don’t hold assets for long.
However, if Bitcoin price corrects, as in the case of last week’s price action, short-term holders quickly lose ground. Despite this, their behavior and presence in the market are crucial to maintaining a healthy bull market.
What Is the Significance of Bitcoin Short-Term Holders?
Observing the behavior of Bitcoin short-term holders is important because of historical correlations to the BTC price. The STH category includes addresses that hold their BTC for less than 155 days. After crossing this arbitrary limit, addresses become long-term hodlers (LTHs). They hold assets for the long term and are not inclined to sell emotionally.
Naturally, the increase in the percentage of BTC supply held by STHs is inversely proportional to the percentage in the hands of LTHs. Interestingly, the long-term chart of supply in the hands of LTH is also inversely proportional to the price of Bitcoin. This is especially evident during the peaks of successive cycles. The more Bitcoin is sold by long-term holders (red areas), the higher the BTC price is (green areas).
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Author: Jakub Dziadkowiec
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