Bitcoin Dominance Continues to Grow as Long-Term Holders Drive the Market

Bitcoin [BTC] continues to dominate the cryptocurrency market, accounting for more than half of the $2.1 trillion global crypto market cap.

Bitcoin [BTC] price has been largely rangebound over the past few months after recovering from a drop below $50,000 earlier in August. BTC price dropped to lows of $49,000 on 5th August after a sell-off that saw the cryptocurrency lose over $10,000 in a matter of hours.

However, on-chain analytics platform Glassnode now reveals that the sell-off was largely caused by an “overreaction” from short-term holders.

Bitcoin price dropped below $50K due to short-term holders

According to Glassnode, short-term Bitcoin holders are much more reactive to price movements, with their responses contributing to local tops or bottoms.

This behavior was evident on 5th August when Bitcoin price crashed to lows of $49,000, a sell-off that was triggered by an “overreaction” from these short-term holders.

The short-term holder Market Value to Realized Value (MVRV) ratio sits below 1, suggesting that these investors are sitting an unrealized losses. This ratio has been below the equilibrium point in the past 30 days.

“In spite of the tempestuous and choppy price action, the resolve of Long-Term Holders remains resolute, with a clear preference for HODL and acquiring coins. Meanwhile, the short-term holder behavior drives the market sell-offs.”

Long-term holders drove H1 2023 rally, sitting on $138M daily profits

On the other hand, long-term Bitcoin holders drove the asset's price rally in the first half of 2023, and they continue to show “diamond hands.”

The supply of Bitcoin among these traders, defined as those who have held their coins for more than six months, has increased significantly.

The majority of these traders became long-term holders after purchasing BTC near the March all-time highs, according to the report.

These long-term holders are now sitting on profits of around $138 million per day, according to Glassnode.

This observation is further strengthened by CryptoQuant data that shows after intense profit-taking activities by whales in May and July, the Exchange Whale Ratio is now dropping.

(Source: CryptoQuant)

While the sell-side risk is increasing the further Bitcoin price rallies, data from CryptoQuant showed that profit-taking activities have cooled down in recent months.

This observation is further strengthened by the Exchange Whale Ratio, which showed a drop in sell-side activity after intense profit-taking by whales was observed in May and July.

Moreover, buyers appear to be absorbing the sold coins, explaining why Bitcoin price has been rangebound in the last few months since dropping from its ATH.

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