Bitcoin Experts View Spending by Long-Term Holders as a Bullish Sign for the Market

Long-Term Bitcoin Holders’ Distribution Signals Positive Market Dynamics, Analysts Suggest

In traditional markets, the act of long-term investors selling off their holdings often points to an impending downturn. However, within the cryptocurrency space, this pattern can be interpreted quite differently. Analysts closely monitoring Bitcoin’s long-term holders — those with coins in wallets for more than 155 days — view their actions as a sign of market optimism.

Markus Thielen, founder of 10x Research, noted that historically, significant reductions in the supply held by long-term holders have preceded strong Bitcoin rallies. He pointed to examples from Q1 and Q4 of 2024, where such declines in long-term holdings were followed by notable price increases. As long as long-term holders continue distributing their assets, Thielen suggested that Bitcoin could face a potential short squeeze that drives prices higher.

Currently, long-term holders control around 13 million BTC, according to analytics firm Glassnode. Over the recent price surge past $100,000, more than 1 million BTC shifted from long-term holders to short-term traders, as these traders eagerly absorbed the new supply. “During the rally above $100K, 1.1M BTC moved from long-term to short-term holders, reflecting strong demand that absorbed the supply at prices above $90K,” Glassnode reported.

However, the pace of sales from long-term holders appears to be slowing down. Glassnode observed that the monthly rate of change in the supply held by long-term versus short-term holders has decelerated, indicating a more calculated approach to selling.

Shift of Bitcoin to ETFs Boosts Market Sentiment

The total Bitcoin supply held in centralized exchange wallets has dropped to 2.7 million BTC, a decrease from over 3 million BTC six months ago. This outflow of Bitcoin is often seen as a bullish signal, as it reduces the immediate supply available for trading.

Yet, Glassnode pointed out that much of this decline is due to the movement of Bitcoin into exchange-traded funds (ETFs), particularly those managed by custodians like Coinbase. These Bitcoin holdings are now part of ETFs, which offer liquidity and can be traded just as easily as the coins themselves.

After adjusting for the Bitcoin transferred into ETFs, Glassnode estimates that over 3 million BTC remain in alternative investment vehicles, suggesting that the apparent supply shock might not be as dramatic as initially assumed. Despite this, the overall trend of Bitcoin flowing out of exchanges and into ETFs signals a positive outlook, as it indicates strong demand and continued market confidence.