Glassnode: The market is in a tug-of-war, who is buying Bitcoin in large quantities?

Original Title: A Return to HODLing

Authors: CryptoVizArt, UkuriaOC, Glassnode

Compiled by: Bai Shui, Jinse Finance

Summary

• After several months of relatively heavy distribution pressure, the behavior of Bitcoin holders seems to be shifting towards holding and accumulation.
• Activity in the spot market indicates a significant increase in selling pressure recently, and this trend has not fully subsided.
• Compared to previous cycle ATH breakthroughs, the proportion of network wealth held by long-term holders is currently relatively large.
• Overall, on-chain conditions suggest that the Bitcoin holder community is confident.

Large Wallets Return to Cryptocurrency Holding Patterns

As the market slowly recovers from last week's sell-off, there is a noticeable uncertainty and hesitation among digital asset investors. However, when analyzing investors' on-chain responses to these turbulent market conditions, a trend towards holding has begun to emerge.

Since Bitcoin's price hit an all-time high in March, the market has undergone a broad supply distribution period, with wallets of various sizes participating. In recent weeks, this trend has shown early signs of reversal, especially for the largest wallets typically associated with ETFs. These large wallets seem to be returning to accumulation mode.

The Accumulation Trend Score (ATS) indicator evaluates the weighted balance changes across the market. This indicator also suggests that the market is shifting towards accumulation-dominant behavior.

The aforementioned shift towards accumulation has prompted the ATS to record its highest possible value of 1.0, indicating significant accumulation in the market over the past month.

This observation aligns with long-term holders (LTH) who significantly withdrew funds before the all-time high. This group has now resumed its preference for HODLing, with a total of +374k BTC moving into LTH status over the past three months.

From this, we can infer that the tendency of investors to hold tokens has now become a greater force relative to their spending pressure.

We can also assess the 7-day change in LTH supply as a tool to evaluate the rate of change in their total balance.

We can see a significant distribution of LTH, which is a typical characteristic of macro top formation, entering the March ATH. Less than 1.7% of trading days recorded greater distribution pressure. Recently, this indicator has returned to positive territory, indicating that the LTH group expresses a preference for holding their tokens.

Despite spot prices remaining above the active investor cost basis from April to July, this basis represents the average acquisition price of active tokens in the market.

The active investor cost basis can be seen as a key threshold that divides bullish and bearish investor sentiment. As the market manages to find support around this level, it indicates a certain degree of potential strength, suggesting that investors generally still expect positive momentum in the short to medium term.

Assessing Spot Market Deviations

When the market is in a technical downtrend, we can use the CVD indicator to estimate the current net balance between buying and selling pressure in the spot market.

This indicator can, in turn, be used to assess mid-term market momentum, as well as any headwinds or tailwinds for prices. Since the formation of the new ATH, we have noted a persistent mechanism of net selling pressure.

Positive CVD values indicate net buying pressure, while negative values indicate net selling pressure.

When we analyze the annual median of the spot CVD, we can see that the median has fluctuated between -22 million and -50 million dollars over the past two years, indicating a net selling bias.

If we consider this long-standing median as the baseline for CVD equilibrium, we can generate an adjusted indicator variable to account for and correct this implicit selling bias.

When comparing the adjusted spot CVD (30d SMA) with monthly percentage price changes, an interesting convergence can be observed.

Within this framework, part of the reason for the recent failure to break through the $70,000 region can be attributed to weak spot demand (negative adjusted CVD). Alternatively, when the adjusted CVD indicator returns to positive territory, it can confirm a potential recovery in spot market demand.

Cycle Volatility

In recent months, price volatility has plateaued, leading to a noticeable slowdown in distribution pressure from LTH. This has caused the percentage of network wealth held by this group to first stabilize and then begin to grow again.

Although LTH exerted significant selling pressure towards the market ATH, the wealth held by long-term investors remains at historical highs compared to previous peaks.

This suggests that if BTC prices rise in the future, LTH may face further withdrawal pressure. It also indicates that despite recent price stagnation or even declines, these investors are increasingly unwilling to sell their tokens at lower prices.

Despite the fluctuating market conditions, both observations suggest that the holder community is becoming more patient and resilient.

Finally, we can use the LTH seller risk ratio to support this assessment. This tool measures the absolute total of realized profits and losses locked in by investors relative to asset size (realized market cap). We can consider this indicator within the following framework:

• High values indicate that investors have significant profits or losses when spending tokens relative to their cost basis. This situation suggests that the market may need to find a new equilibrium and typically occurs during periods of high price volatility.
• Low values indicate that the spending of most tokens is relatively close to their breakeven cost basis, suggesting that a certain degree of balance has been reached. This situation usually indicates that the "profit and loss" within the current price range has been exhausted, typically describing a low-volatility environment.

Compared to previous ATH breakthroughs, the LTH seller risk ratio remains at a low level. This means that the profits obtained by the LTH group are relatively small compared to previous market cycles. It also means that this group is waiting for higher prices before increasing their distribution pressure.

Conclusion

Despite the challenging and turbulent market environment, long-term Bitcoin holders remain steadfast, with evidence suggesting they are increasing their accumulation behavior.

Compared to previous cycle peaks, this group of investors holds a higher proportion of Bitcoin network wealth, indicating a certain level of patience as they wait for higher prices. Furthermore, in the context of the maximum contraction in prices during the cycle, this group of investors has not exhibited panic selling, highlighting the resilience of their overall conviction.