Bitcoin Chain (BTC) Analysis – How Do Long-Term Holders Respond?

Bitcoin Invalidates $18,000 Support

After signs of insolvency and then bankruptcy of the FTX exchange, Bitcoin price (BTC) penetrated and then invalidated the former bear market floor, located around $18,000.

Plunging a large base of holders into a latent loss situation, the drop in price caused a panic wave that pushed BTC down to the $16,000 levelwhere the Balance Price is, which has already supported the June 2022 price reduction.

Figure 1: Daily price of BTC

The long-term holder cohort has shown significant responsiveness compared to the surrender events of May and June 2022, they lost almost 60,000 BTC in the past week.

With a loss realization approaching -50%, this group, although known for its price insensitivity, has caused the 4th strongest wave of UTXO renewal of the current bear cycle.

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BTC bounced off the flat price

Over time, the price of BTC has historically reached three distinct support levels on a chain:

• Realized Price (in yellow), which aggregates the price of all UTXOs circulating on the network at the time of their last movement;
• The Equilibrium Price (in green) calculates the difference between the realized price and the transfer price (price weighted according to the Days of Parties Deleted). It can be thought of as a kind of “fair value” price model, finding the difference between what was paid (realized), and what was spent (transferred);
• Delta Award (in purple) a “half-fundamental, half-technical” hybrid price model, calculated as the difference between the realized price and the all-time average price.

Figure 2: Spot, Realized, Break-even and Price Delta

In previous cycles, most of the floor formation process took place between the Realized Price and the Equilibrium Pricewhile all the lows were set by a volatile wick that reached the price of Delta.

Currently, we can note that The spot price bounces for the second time to the flat priceafter the first test in June 2022, at the former support level of $18,000.

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Significant Expenditures at Former UTXOs

If a loss of support at $18,000 facilitated the redistribution of many BTC, it is relevant to highlight the significant renewal phase that occurred at the same time as this event.

Basically, a peak of nearly 2.4 million Coin Days (JP) deleted recorded in the past weekindicating that many positions held for a long time were discarded.

Figure 3: Days of Destroyed Parties

This refresh period coincides with at least a 20% drop in the price of BTC in memory of the bloody drops in May and June 2022 and shows that the fall in price not only affected short-term holders, but the market as a whole.

By separating the amount of spending of a certain period by age bands, we can observe the relative spending behaviors of young (less than 6 months old) and old (older than 6 months) tires.

Therefore, the following graph measures the relative share of the amount of expenditure related to old coins, held by long-term holders.

Figure 4: Age bands of spent BTC volume (over 6 months)

It then appears that the loss of $18,000 support led to the 4th strongest wave of UTXO renewal in the current bear cyclein terms of relative weight.

This means that some long-term holders participated strongly in the dynamics of the redistribution and indeed succumbed to the selling pressure.

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Long term holders let go

By measuring the supply held by the long-term investor (LTH) cohort, we can highlight the spending behavior whose tracks we have just identified.

The following graph shows the supply of LTH (orange), as well as the daily variation of this measure (purple). Here, a drop of almost 60,000 BTCstarting on October 7th and continuing to the present day is clearly recognizable.

Figure 5: Supply of long-term holders and daily variation

Moreover, it seems that outflows from the LTH wallet occurred at a rate of approximately 15,000 BTC to 20,000 BTC per daywhich is still a lower throughput than during the May and June 2022 price capitalization events.

In summary, this cohort of holders liquidated almost 0.43% of their holdings during the recent decline, a less significant shedding phrase that indicates that despite selling pressure, LTHs are not inclined to break their BTC on the price levels below .

Finally, it appears that compared to previous bear cycles, the current cohort of long-term investors has lower loss provisioning, both relative and absolute.

Basically, almost 42.8% of the 5.95 million BTC currently held by LTH is smoldering latent loss, which represents about 2.54 million BTC.

Figure 6: Supply of long-term holders at a loss (absolute and relative values)

During the bear market of 2015 – 2016, the supply held at a loss by this cohort had reached an all-time high of 2.82 million BTC.

This gradual improvement in BTC’s long-term profitability over recent bear cycles is partially explained by the increased likelihood of old coins being held across bear markets (HODLing behavior and loss of wallet access).

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Summary of the analysis of this chain

In summary, this week’s data, after invalidating the $18,000 floor, shows the redistribution caused the drop in price by more than 600,000 BTC.

The spot price returned to reach the equilibrium pricewhich acts as historical on-chain support for declining BTC during bear markets, with price delta as the last defense.

With a large share of the spending volume over the past seven days involving UTXOs older than 6 months, it appears so The drop in the spot price towards the $16,000 level pressured some long-term holders (LTH) to sell.

Basically, almost 60,000 BTC, or almost 10% of the total redistributed volume, left the LTH walletwith speed and size, however, lower than during the capitalization events of May and June 2022, and a profitability of about -50%.

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Sources – Figure 2 to 8: Glassnode

Chain analytics, a fierce fighter of information asymmetry.

My goal is to inform everyone about the state of Bitcoin (as an asset and a distributed network) through the prism of chain analysis.