On-Chain Analysis: Bitcoin Long term holders
Bitcoin took a correctional hit on the 17th of February, dropping from $44,174.45 to $40,165.78.
The result of the price action caused the Crypto Fear & Greed index to dip from a neutral value of 52 on the morning of the 17th down to a fear value of 30 the following morning on the 18th of February.
Due to the dip, I decided to look at on-chain data to see if there were any huge inflows that came into an exchange that possible might have sold BTC on an exchange.
When looking at the BTC exchange inflow data, this inflow looks normal to me and I am not seeing any huge inflows that came into an exchange to sell. All inflows were under 1k BTC and BTC netflow mostly ranged within 500 to -500 for inflows/outflows.
However, I was still curious and took a look a bit deeper into inflows and outflows to see what the short term holders (STH) and long term holders (LTH) were doing.
First, I took a look at STH to see what their BTC exchange inflows look like.
In this chart, you can see that there was no spike in BTC inflows during the Feb 17th BTC price correction, meaning that STH was not the caused of this correction.
Next, let’s take a look at LTH.
In this chart, we are seeing BTC exchange inflows coming from Long term holder’s addresses. During the price correction down to nearly $40k, you can see spikes of inflows. This tells me that the inflows we saw in the earlier chart was done mostly by addresses belonging to LTH.
So, we have LTH sending BTC onto exchange to sell, a cascade of long liquidations is most likely to happen during price dips and the traditional financial market performing negatively on the same day makes a lot of sense when trying to understand why BTC’s price corrected the way it did.
Of course, the thought of LTH selling is scary. So, let’s look and see what happened when I zoom out.
This was what we see when zooming out. Those BTC inflows from LTH look like this (indicated by the red dot) when comparing today’s inflow to the entire year of 2021.
Next, I took a dive into other data regarding LTH.
The chart above is looking at the BTC Sum Age Distribution data for LTH. This data shows the distribution of long term holders with UTXO data. When looking at this chart you can see it trending upward despite the price correction. Seeing this trending up is telling me that LTH hodlers are still hodling.
Next, let’s look at LTH realized UTXO data. UTXO is the abbreviation for unspent transaction output which is measures the amount of BTC on an address that a person has left remaining after a transaction.
In this chart, we can also see that realized UTXO data is also trending upward with the exception of the age group ranging 6M-12M and 5–7Yr holders. This means that the Bitcoin supply left on remaining addresses belonging to LTH are still increasing despite there being some BTC inflowing onto exchanges. This tells me that their balances are increasing.
However, I wanted to make sure that 5–7 yr holders didn’t just dumped a bunch of Bitcoin supply on the market, so I took a look at another data. The BTC Exchange Reserve data.
This chart is showing that BTC Exchange Reserve has been dropping regardless of price action. It means that despite BTC’s price dipping, there are people accumulating Bitcoin and taking the Bitcoin off the exchanges.
Below is another cool chart that I want to share along with this On-chain article update. This chart displays the BTC exchange inflow data based on the number of addresses making those inflows (indicated by the address count metric).
When looking at the weekly moving average of the address count making BTC inflows, it is telling me that less and less addresses are sending their Bitcoin onto exchanges. I want to leave with this because I think the cryptocurrency community will see a Bitcoin scarcity sooner then we think.
In conclusion, based off of everything I wrote about here, I feel that this price correction we saw on the 17th of February might just temporary. I am not seeing enough inflows of Bitcoin flowing onto exchanges to sell. In fact, I am seeing the opposite. I am seeing more Bitcoin going off exchanges and stored elsewhere. I am seeing long term holders continue to hold their coins and increase their holding balances.
Finally, this article is my quick update to show what’s happening on the on-chain data side. This article should not be used for financial advice. I am not a financial advisor and please check with your financial advisor before making financial decisions.