The recent surge in short-term bitcoin (BTC) holders could indicate a “final dump” of sellers, meaning that capitulation events are over, leaving the market poised for months of accumulation.
Market analytics company Glassnote’s latest report “The Week On Chain” on Monday notes that short-term holders (STHs) have expanded their holdings by 330,000 BTC since the catastrophic collapse of Terra in May. As a result, they may be the canary in the coal mine that points the way to market recovery..
During the sell-off that began in May and lasted until June, short-term bitcoin holders set a new trend by buying extremely cheap coins at or below $20,000, putting them in a “financial advantage”.
After a dramatic capitulation event, the ownership structure of #bitcoin has been reshaped.
As markets sell-off, $BTC migrates from weaker hands, to those stepping in at the lows. Here, we explore how to track this migration of coins using age bands.https://t.co/xBxdvALRmZ
— glassnode (@glassnode) August 15, 2022
After a dramatic capitulation event, bitcoin’s ownership structure has been reconfigured. As the markets sell off, BTC migrates from the weakest hands, to those that intervene at the lows. Here we explore how to track this coin migration using age bands.https://t.co/xBxdvALRmZ
The report notes that An outflow of some 200,000 coins from long-term holders (LTH) and net outflows from the exchange since May seem to have been the main contributors to the increasing supply of STH.. Taken together, these developments indicate that a capitulation has occurred and that STHs “stepped in during the exit, and now hold coins with a much lower cost base.”
STHs are defined as wallets that hold BTC for no more than 154 days. They convert to LTH at 155 days.
Typically, STHs buy coins at or near all-time high prices and sell much lower as “extreme STH accumulation is normally concurrent with bull market top formations.”.” However, Glassnode claimed that the May and June buyers created a “constructive divergence” by breaking that trend.
“Such events describe a transfer of coins to new buyers who are initially classified as STH, who have a low-cost basis, but are in a financially advantageous position to HODL thereafter,” he added..
Glassnode suggests that the next aspect of a market turn that analysts need to watch is whether the new May and June STHs “have the conviction to hold” and contribute to further price gains.
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