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Bitcoin on-chain data highlights the steps BTC is taking to exit the bear market

Bitcoin on-chain data highlights the steps BTC is taking to exit the bear market

Glassnode’s latest analysis suggests that Bitcoin has established a strong foundation below the $30,000 mark. The current supply structure reflects similarities to early 2016 and early 2019.

According to the report, the Long-Term Holder (LTH) supply balance is just shy of a new all-time high, with a total supply balance of 14.161 million Bitcoin (BTC). On the other hand, short-term holders (STH) – who acquired coins post FTX’s failure – have seen a relatively stable supply balance of 2.914 million BTC in 2023.

Long-Term Holders Remain Resilient Despite Major Downturns

155 days passed from the FTX exchange collapse on November 8, 2022, until April 12. The 155-day period indicates the minimum duration of time that a Bitcoin holder must have held their coins to be categorized as a long-term holder (LTH). Thus, the supply distribution is divided into two parts: the first half, prior to FTX’s collapse, represents LTHs’ supply, while the second half, post-collapse, represents short-term holders.

Bitcoin Long/Short-Term Holder Supply. Source: Glassnode

The report also compared the current market cycle to previous ones based on LTH behavior expressed through changes in their supply. This analysis indicates that Bitcoin is going through a period called the “Plateau of Patience,” where LTH supply tends to maintain an ATH for several months to more than a year.
The supply structure also shows similarities to early 2016 and early 2019. Although Bitcoin’s price did not reach new lows in those years, the actual bull run only began 18 to 24 months later, in late 2020 and 2021. During this exponential growth period, there is usually a sharp increase in the percentage of holdings on LTH in profit, followed by profit-taking.

Long-Term and Short-Term Holder Supply in Profit/Loss. Source: Glassnode

The year-to-date surge in Bitcoin’s price is supported by an “explosive uptick” in coins held at a profit. The report also noted that bear market floors are characterized by widespread capitulation, followed by an equal and opposite inflow of demand to absorb it.

Related: Bitcoin On-Chain Data Highlights Key Similarities Between the 2019 and 2023 BTC Price Rally

As the price rallies out of the bottom formation zone, all of these coins return to profit. In 2023, a total of 6.2 million BTC returned to profit, representing 32.3% of the supply, indicating a strong cost basis foundation of buyers below $30,000.

Bitcoin Percent Supply in Profit. Source: Glassnode

The Long-Term Holder’s supply is a crucial factor to consider when analyzing the market. Glassnode emphasizes the importance of patience in a market cycle. Bitcoin’s current supply structure indicates that although a bull run may not occur soon, BTC is unlikely to drop below the $15,500 level.