Bitcoin Reaches Multi-Year Dominance as Short-Term Holder Supply Drops

• The 30-day change in Bitcoin’s short-term holder (STH) supply has reached its lowest level since 2012, according to CryptoQuant data.
• This shift indicates an increasing dominance of long-term holders (LTH), who generally hold Bitcoin for periods extending beyond 155 days.
• However, a lack of new demand from short-term holders could be restricting Bitcoin’s price movement, as discussed by a market intelligence analyst.

Explore the latest trends in Bitcoin’s market dynamics and understand the crucial role of short-term holders in influencing price rallies.

Bitcoin’s Short-Term Holder Supply Hits Decade Low

CryptoQuant data reveals that the 30-day change in Bitcoin’s STH supply has plummeted to levels unseen since 2012. This change signifies a considerable shift toward LTH, a group characterized by their propensity to hold onto Bitcoin for extended durations, commonly defined as addresses retaining Bitcoin for at least 155 days. However, it is important to note that the reluctance of new short-term holders to enter the market could be hindering Bitcoin’s ability to break free from its current price stagnation. Julio Moreno, Head of Research at CryptoQuant, underscores the historical trend where Bitcoin reaches new highs primarily due to fresh demand from new holders who purchase from LTH and consequently drive prices upward.

Historical Correlation Between Short-Term Holders and Price Rallies

According to Moreno, while the accumulation of Bitcoin by LTH is a fundamental precursor for price appreciation, sustained price rallies typically rely on fresh demand from STH. Moreno states, “Currently, there’s still no significant new demand from short-term holders.” This assertion is supported by CryptoQuant’s analysis, which highlights a positive correlation between the activity of short-term holders and the price trajectory of Bitcoin. Hence, the absence of this crucial demand component may serve as an explanatory factor for Bitcoin’s current price behavior.

Bitcoin’s Market Cap Dominance Surges

In tandem with the shifting holder dynamics, Bitcoin’s market capitalization has surged to encompass 54.9% of the entire cryptocurrency market, achieving its highest point since April 2021. A report by Kaiko Research notes that Bitcoin’s market dominance over the top 50 altcoins is now at its peak, mirroring levels last seen when the market neared all-time highs earlier this year. This trend indicates a consolidation within the crypto market, with Bitcoin increasingly being perceived as a safe harbor during periods of volatility and market upheaval.

Bitcoin as a Safe Haven Amid Market Uncertainty

The Bitcoin market experienced a notable sell-off on August 5, driven by a sudden rate hike in Japan. Despite this, Bitcoin’s cumulative volume delta (CVD)—an indicator of buying and selling pressure—remained positive on U.S. exchanges, whilst many altcoins suffered substantial selling pressure. Kaiko Research analysts highlight this divergence as evidence of Bitcoin’s resilience and its status as a “safe haven” investment. The report further elaborates that the introduction of spot Bitcoin ETFs in the U.S. market in January has bolstered Bitcoin’s appeal as an investable asset, drawing substantial institutional capital. In contrast, altcoins continue to exhibit higher risk and volatility, especially in the current uncertain macroeconomic environment.

Conclusion

In summary, the current dynamics within the Bitcoin market underscore a crucial interplay between short-term and long-term holders. While long-term holders continue to accumulate, the apparent hesitancy of short-term holders to engage poses a challenge for price rallies. Furthermore, Bitcoin’s increasing dominance and resilience amidst market volatility reinforce its position as a preferred reserve in the crypto landscape. For future price appreciation, the market will likely need to witness renewed activity from short-term holders.