This week, Bitcoin demonstrated remarkable strength, consolidating between $59.7K and $64.2K while maintaining the bullish momentum from October. The price formation resembles an ascending flag pattern, and on-chain data continues to reflect robust supply dynamics and network activity levels far below those seen at peak bull markets.
Long-term holders (LTHs) sold a small portion of their holdings—a typical behavior during bull cycles—even as prices approached previous highs. Meanwhile, exchange balances dwindled, and Bitcoin miners' hash rate and revenue neared record levels.
The combination of strong supply dynamics, recovering mining activity, and subdued network usage paints a constructive outlook for Bitcoin in the coming weeks.
1. Supply-Side Dynamics
a. Long-Term Holder (LTH) vs. Short-Term Holder (STH) Supply
When Bitcoin approaches all-time highs (ATHs), LTHs historically begin selling. Recently, as prices touched $66K, LTH supply peaked locally at 81.5% of total supply. Despite this dominance, LTHs sold only 0.73% of circulating Bitcoin, as shown in the chart below.
b. Net Position Changes of LTHs
This sell pressure is evident in the net position changes of LTHs. After accumulating over 400K BTC monthly for five months starting April 2021, LTH holdings have stabilized at a moderate level, indicating balanced maturation and spending of older coins.
c. Spending by Coin Age
Coins older than one month now account for 6% of total transaction volume—consistent with 2021 levels but far below the >10% seen during Q1 2021. This suggests the market is absorbing sell pressure efficiently, a trend that typically persists until bull market peaks.
d. Reactivated Bitcoin Supply
The "reactivated supply" metric tracks coins older than one year re-entering circulation. Currently, ~6,500 BTC are reactivated weekly—a level comparable to late 2019/early 2020, often signaling late bear-market conditions.
e. HODL Waves
The HODL Wave chart reveals only 15% of supply is younger than three months (an all-time low), meaning 85% is held by long-term investors. Rising LTH selling would shift this balance upward.
Supply Summary
Since August 2021, >85% of Bitcoin has remained dormant. Current dynamics suggest LTHs are strategically profit-taking rather than panic-selling, underscoring strong conviction in holding core positions.
2. Demand-Side Dynamics
Bull markets typically unfold in two phases:
- Smart money accumulation (pre-ATH): Low on-chain activity, stable supply, strategic profit-taking.
- Speculative frenzy (post-ATH): Retail interest surges, on-chain activity spikes, and LTHs exit.
Current metrics align with Phase 1. Why?
a. Exchange Net Flows
Exchanges saw sustained outflows, with daily net withdrawals exceeding 5K BTC this week. Total exchange balances hit multi-year lows (12.9% of circulating supply), indicating dwindling available liquidity.
b. Bitcoin Transaction Volume
On-chain activity remains subdued at 225K daily transactions—akin to 2019–2020 bear-market levels and far below 2021’s frenzy.
c. New Entity Growth
New entities (11K/day) are growing modestly, barely exceeding bear-market baselines.
Demand Summary
With prices near ATHs but on-chain activity at bear-market lows, this divergence suggests an interrupted accumulation phase—characterized by quiet buying, low exchange reserves, and LTHs’ tactical selling.
3. Mining Market
a. Miner Revenue
Post-halving, BTC-denominated miner revenue drops sharply every four years. Currently, miners earn 900–1,000 BTC/day. However, USD-denominated revenue is near ATHs (~$67M/day), just 5% below May 2021’s peak.
b. Thermocap
Thermocap—the cumulative USD value of all block rewards—reflects miners’ total investment. At $32.8B, it confirms Bitcoin’s security model remains robust, with 93% of all rewards earned in the past 18 months despite the 2020 halving.
FAQs
Q1: Why are long-term holders selling now?
A: LTHs often take profits near ATHs, but current sales (0.73% of supply) suggest strategic rebalancing rather than mass exits.
👉 Learn how Bitcoin's supply dynamics influence price trends
Q2: How does low on-chain activity impact Bitcoin’s price?
A: Low activity during price highs signals accumulation by smart money, often preceding major rallies.
Q3: What does rising Thermocap indicate?
A: It shows miners’ cumulative investment is at ATHs, reinforcing network security and incentivization efficiency.
👉 Explore Bitcoin mining economics in depth
Reference:
Glassnode Week 45 Report