Is it time for the long-term Bitcoin hodler to accumulate after surrenderin

To determine the market cycle length, it is necessary to consider the past behaviors of the participants. When it comes to Bitcoin, there are two main streams that change the direction of price movement: long-term holders (LTH) and short-term holders (STH).

Long-term holders are addresses that have held Bitcoins for more than 155 days. They are often referred to as “smart investors” in this area, as they are largely tolerant of market volatility and accumulate at the bottom, sell at the top.

In contrast, short-term holders are addresses that hold Bitcoin for less than 155 days and are considered a more price-sensitive group because they are significantly affected by volatility.

Observing the behavior of LTH and STH further proves this. Since 2010, LTH buys BTC every time the price is pushed down and sells at most of the peak.

Behavior of long-term holders and short-term holders
Behavior of long-term holders and short-term holders | Source: Glassnode

Recent changes in LTH’s net position suggest they are capitulating. Bitcoin’s decline was triggered by the crash of Terra (LUNA) and the Celsius crisis, causing many LTHs to sell their positions.

However, LTH liquidation of positions is often seen as a sign of a market bottom.

According to data from Glassnode, the sell-off that started in May peaked in July and is now decreasing. The chart below illustrates the evolution of LTH’s position, with red points indicating a decrease in overall position and blue representing an increased number of holdings.

Change in LTH's net position in 2022
Change in LTH’s net position in 2022 | Source: Glassnode

Zooming out the chart shows other periods that prompted LTH to sell the asset. In March 2020, when the COVID-19 pandemic began to destroy the global markets, LTH surrendered out of fear and uncertainty. The result was a catastrophic drop in prices that took until July of that year to recover.

The next major sell-off occurred from January 2021 to May 2021. However, Bitcoin was in a bull cycle at the time, so despite the sell-off, LTH made a significant profit.

The current capitulation that started in April 2022 is still ongoing. Like in March 2020, the capitulation this time also caused a massive drop in price, pushing Bitcoin down to $20,000 for most of the summer. Although the selling volume has been decreasing since August started, the accumulation rate is still low.

So, it remains unclear whether this is the beginning of another accumulation phase and whether a small increase in the accumulation rate can overwhelm the sell-off? If previous bear cycles repeat, Bitcoin price could gradually increase and LTH once again accumulates.

Change in total supply held by long-term holders
Change in total supply held by long-term holders | Source: Glassnode
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