This article is from the Glassnode Chain Weekly Report"The Week On-chain (Week 22, 2021)", translated and organized by Coin World Research Institute.

Translated by: Winy Huang

This article is from the Glassnode Chain Weekly Report

Currency World-Glassnode Chain Weekly Report: Holding Coins

This past week, bitcoin price consolidated within a trading range of $9,430. Bitcoin started the day at a low of $31,327 before hitting a recent high of $40,757 before falling back to lows. Influenced by the previous sell-off, the market is expecting a period of correction.

The first question that investors care about is whether the bear market has come, or has the market returned to the adjustment stage? In this article, we will assess the on-chain spending performance of long-term and short-term coin holders as a measure of their relative sentiment.

• close to pain threshold

• The current market structure is very interesting: five months ago the price of Bitcoin was only slightly lower than the current level. Therefore, the profitable coins accumulated before 2021 are basically held by long-term currency holders (LTHs), and those who entered the market at the end of December or early January are also close to their cost prices. In contrast, short-term token holders (STHs) are almost all in a state of unrealized losses.

Short-Term Holders (STH). Those who hold currency for less than 155 days are usually considered new entrants,

Long-term coin holders (LTH). Those who have held coins for more than 155 days are usually regarded as hoarders, industry experts, and ultimate buyers.

Through this classification, we determine the proportion of long-term and short-term currency holders, and further derive how many of these coins are in a state of profit or loss. The current trading price of Bitcoin is very close to 155 days ago. We can also see that a small number of long-term currency holders are currently at a loss, as shown in the blue part of the figure below.

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• Real-time chart of profit and loss of long-term and short-term currency holders

• The key statistics on the current supply dynamics in the chart above are:

• Profitable long-term holders hold 69% of Bitcoin (dark blue). This also basically represents all buyers before 2021.

• Loss-making long-term holders hold 0.5% of Bitcoin (light blue part), entering the market in late 2020 or early 2021. If the price keeps oscillating (or falling) in this area for a month, the thickness of the light blue part indicates how many buyers who entered the market in January continue to hold coins.

Profitable short-term holders hold only 4.5% of Bitcoin (dark red). Bitcoin has plummeted more than 30% from its all-time high of $64,000 in mid-April. This suggests that around 26% of Bitcoin is currently in the red.

Therefore, 26% of Bitcoins held by loss-making short-term currency holders are currently in a state of unrealized losses (the light red part). These are the people most likely to be sources of sell-side pressure, now or in the future.

In our latest report, we explore the net unrealized gains and losses of long- and short-term coin holders as a way to identify their relative pain points. We conclude that short-term holders have sold a significant amount of Bitcoin, but may continue to do so. On the other hand, most long-term currency holders are in a state of profit, but they are also approaching the critical value of "unrealized profit and loss", which is 0.75. In previous cycles, this marked the start of more bearish trends as long-term holders captured remaining unrealized gains.

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Weekly data real-time chart on the chain

The form of spending matters

• From the above, we can conclude that a large number of Bitcoin investors are at a loss, and the situation looks very grim.

• However, now that a potential pain point in the market has been identified, we can observe actual spending behavior on-chain to verify whether investors are acting on paper losses, or are spooked by a market crash.

Through the Average Spent Output Lifetime (ASOL) metric, we can get the average age of the unspent transaction output (UTXO) of the day. In the chart below, we use a 7-day exponential moving average (EMA) to highlight recent spending behavior while removing some noise.

A high ASOL value indicates that old coins are being moved, distributed.

Here are two key results related to recent price action:

1. In early May, there was a surge in old currency spending, possibly asset allocation (the pundits may have foreseen market weakness), and capital circulation (the price of ETH doubled during this period).

2. During the sell-off period, ASOL fell sharply and returned to the level below the accumulation range of 50,000-60,000 US dollars. This shows that long-term coin holders did not panic sell, instead, they continued to hold during the decline.

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• ASOL real-time chart

• The other two lifespan indicators "Coin-Days Destroyed (CDD)" and "Dormancy" also represent similar meanings. Despite a 50% drop in price from its peak, old coins appear to remain "dormant" (low in value).

• Dormancy fixes the CDD of on-chain transactions, showing the lifetime of each unit of BTC.

High values ​​usually indicate bearishness as old coins are spent, distributed.

Low values ​​are usually bullish as old coins remain dormant and continue to accumulate.

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Dormancy + CDD real-time chart

As can be seen in ASOL, the total lifetime spent has fallen to or below the level seen before the 2020 bull run. This confirms that old coins are being held continuously, with most payouts coming from short-term coin holders.

Who is selling?

Currently, we have established that old coins are being spent less than usual. However, bitcoin prices are falling while exchange balances are climbing. So the question is, who is driving the sell-off?

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Real-time chart of liquid and illiquid supply

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Real-time graph of total bitcoin transfers

By analyzing and filtering out the spending-output profit ratio (SOPR) of short-term currency holders (STH), we will find that short-term currency holders sell the currency accumulated at the previous high price at the current low price, thereby continuing to realize losses. When widespread capitulation occurs, this indicator will stay below 1.0 for a long time. With this in mind, the current market structure compares favorably to the events of the March 2020 market crash.

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• STH-SOPR real-time chart

• Since the start of 2020, long-term holders have profited as the price of Bitcoin rose from $10,000 to $42,000, and their spending has since reached a fairly stable baseline.

The spending patterns of long-term holders appear to be unaffected by the big sell-off. In fact, the volatility of spending volumes has declined. This means that long-term holders are generally reluctant to liquidate Bitcoin at low prices.

On the other hand, short-term holders spent more than 5x during previous market crashes, with the largest payouts occurring around current market lows.

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• Profit/loss real-time graph of BTC transfer volume

• Finally, we can compare three key holders: short-term holders (blue), long-term holders (green), and miners (orange).

Long-term coin holders are holding and hoarding coins.

Miners are hoarding coins.