A recent spike in BTC short-term holders could signal a “final flush” from sellers, meaning capitulation events are complete and the market is poised for months of accumulation.
Market analysis firm Glassnode’s most recent report, Aug. 15, “The Week On Chain” indicates that short-term holders (STHs) have added 330,000 BTC to their holdings since LUNA’s catastrophic collapse in May. As a result, they could be the canary in the coal mine, signaling the path to market recovery.
During the mass sell-offs that began in May-June, short-term Bitcoin (BTC) holders established a new trend by buying ultra-cheap coins at or below $20,000, putting them in an “advantageous financial position.”
After a dramatic capitulation event, #Bitcoin’s ownership structure has been redesigned.
As markets sell off, $BTC is migrating from weaker hands to those getting in at the lows. Here we examine how this migration of coins can be tracked by age groups. https://t.co/xBxdvALRmZ
— glassnode (@glassnode) August 15, 2022
The report states that an outflow of about 200,000 coins from long-term holders (LTHs) and net outflows from exchanges since May appear to be the main drivers behind the rising STH supply. Taken together, these events suggest that capitulation has occurred and that STHs “have stepped in during the flush and now own coins at a much lower cost base.”
STHs are defined as wallets that hold BTC for no more than 154 days. You will become LTH after 155 days.
Typically, STHs buy coins at or near all-time highs and sell them much lower as “extreme STH accumulation usually coincides with bull market top formations.” However, Glassnode stated that the May and June buyers created “constructive divergence” to buck this trend.
“Such events describe a transfer of coins to new buyers who are initially classed as STHs but have a low cost basis but are in an advantageous financial position for HODL from then on,” she added.
Related: Bitcoin price corrects after hitting a wall on a multi-month descending trendline
Glassnode suggests that the next aspect of a market reversal for analysts to consider is whether May and June’s new STHs “have the conviction to hold out” and contribute to further price increases.
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