Market Changes and Bitcoin Holders' Decisions

first level title

Sensibility is the more dominant force

In the field of encryption, the data of the public chain is transparent, which brings unprecedented transparency and accuracy to market analysis. However, people are often more willing to believe the so-called news, and the noise of various markets is flying all over the sky. In this case, people tend to waver, and finally find that various operations are fierce.

But in real analysis, we need to remove all kinds of prejudice as much as possible, shield all kinds of noise as much as possible, and observe the real signal of the market from the level of people's behavior as much as possible, instead of following the trend. This is very helpful for decision making.

first level title

Data in the encrypted world is a real treasure

Below we refer to the chart data of Glassnode to briefly explain some indicators. One is about SOPR, and the other is the overall trend of long-term holders' position changes under different market conditions.

first level title

SOPR VS HOLDERS' POSITION CHANGES

SOPR is used to observe the overall profitability of btc holders. SOPR (Spent Output Profit Ratio) refers to the profit rate of BTC spending.

The most common way to calculate SOPR is to take all inputs of a given block * current price / all inputs * initial price, and the initial price refers to the initial price of each UTXO. If it is greater than 1, it is in a profitable state on average, if it is less than 1, it is in a loss state on average, and if it is equal to 1, it is in a break-even state. The more it is greater than 1, the higher the profit, on the contrary, the more it is less than 1, the greater the loss. Its formula is as follows:

image description

(SOPR calculation formula, Glassnode)

The picture below is from Glassnode. In addition to SOPR and aSOPR, it also extracts the SOPR of short-term holders for comparison through crowd extraction, that is, BTC holders whose holding time is less than 155 days. It is exactly the picture below Said STH-SOPR.

image description

From the above figure, we can see the changing trend of aSOPR and short-term holder SOPR (STH-SOPR) curves with the change of BTC price over the past year.

As can be seen:

As can be seen:

*As far as the SOPR of the two is concerned, the average profit of the overall market performed well this year. Only in a short period of time in the middle and late September 2020 and after May 19, 2021, there was a loss. The whole is in a state of profit.

*Compared to the average aSOPR, the performance of STH-SOPR is poor, and it has continued to do so for a year. Only in terms of average relative, the strategy of short-term holders is not a good strategy.

In addition, this indicator can be combined with the changes in the positions of the corresponding people to see the overall decision-making behavior of this part of the holders, so as to formulate better coping strategies.

first level title

Changes in the positions of long-term BTC holders can be seen in their market operations. According to the definition of Glassnode, its long-term holders refer to addresses that have not been touched for at least 155 days. We can look at the graph released by glassnode:

image description

(Performance of BTC long-term holders in different market stages, Glassnode)

As can be seen from the figure above:

*When the price is in a more obvious accelerated rise, the overall position of long-term holders tends to decline, which is between May 2017 and January 2018, between May and September 2020, and early 2021 Similar phenomena have occurred between May 2021.

This shows that once the market rises sharply, some of the long-term holders begin to sell. One thing to consider here is that the long-term holders defined by Glassnode are addresses that have not been moved for 155 days. From this perspective, some of them cannot be counted as long-term holders as a whole. It can be considered to increase the holding time of long-term holders from 155 days to 365 days or even more than 730 days, and the results may be different.

Even so, we can also see the operating habits of some long-term holders, which is to gradually sell when the market rises and gradually buy when the market falls.

*Since May 19th, as the price of BTC has been declining, long-term holders have seen their positions grow as a whole, that is to say, in their view, the current price is at a low level and they are accumulating more stage of the token. This accumulation behavior is the main theme from 2018 to May 2020.

*Although the current accumulation looks similar to the accumulation in 2018, it should be noted that the price in the accumulation stage is often higher than the price in the sale stage, and not all sales will eventually bring better results. This requires extreme timing of the sell and buy periods. It looks simple in hindsight, but it is actually not easy to operate.

*At the bottom of the market in 2018 and 2019, the overall positions of long-term holders have actually declined, which shows that even among long-term holders, not everyone is firm enough. In the most turbulent stage of the market, not only short-term operators may be washed out, but also long-term holders who are not firm enough.

*On the whole, the price in the selling period is not necessarily much higher than the price in the accumulation period, which means that even if you sell when it rises and buy when it falls, not most people actually make profits, and many people may There is a loss in such an operation. From a historical point of view, the longer the holding time, the greater the probability of making a profit and the higher the rate of return. This means that relatively speaking, holding may be a better strategy for ordinary users unless they are expert traders.

image description

(Position change trend of long-term BTC holders, Glassnode)

From the above picture, we can see the changes in the total amount of BTC held by long-term holders from September 2016 to May 2021, and we can also see some things:

*At the end of 2017 and the beginning of 18, at the historical high of the previous cycle, the BTC held by long-term holders reached a historical low of 8.6 million, accounting for 51% of the total circulating supply; since then, it has entered the accumulation stage, and BTC has been held for a long time Some continue to be in the accumulation phase as a whole.

*During the sharp drop on May 19, 2021, the total number of long-term holders was 10.9 million, accounting for 58% of the total circulating supply, which was the lowest point in the past two years. Even so, it was higher than The volume at the low point of the last cycle, now long-term holders are once again entering the accumulation phase.

*Although each decline is large, the price high will also greatly increase the price of the accumulation stage. From a historical point of view, even if it falls, the bottom price of each cycle has been greatly improved accordingly.

*Judging from the behavior of long-term holders, long-term holders have sufficient confidence in the future of BTC. One is that some long-term holders almost never move and focus on accumulation; the other is that although some long-term holders gradually sell at the high point of the market to make profits, they gradually buy at the low point of the market. It lies in accumulating more, not leaving the market directly.

There is a lot of rich data on the blockchain chain, which hides a lot of people's operational behavior patterns, but it has not been fully explored. The data in it can give us more signals instead of noise.