Bitcoin: Deciphering the Influences of Long and Short Term Investors

Navigating through market turbulence can seem like a conundrum, with periods of optimism and skepticism occurring in quick succession. Can we really rely on the behavior of certain market participants to determine the troughs and peaks of these waves? This article dives deep into long-term and short-term investor strategiesunveiling how their movements shape Bitcoin price cycles and open windows of opportunity for those who know when to act.

Stability vs Responsiveness: The game of long and short term investors

To classify investors and predict their influence on the Bitcoin market, we often refer to the duration of their BTC holdings.

THE long-term investors (Long-Term Holders – LTH):

  • Definition : They have held their bitcoins for more than 155 days, and play a key role as stabilizers. Indeed, they accumulate during periods of decline and capitulation, when the mass is no longer in the market and BTC reaches extremely interesting levels.
  • Behaviours : They start to distribute their coins when its price reaches important levels for their profit taking.

THE short-term investors (Short-Term Holders – STH):

  • Definition : Active for less than 155 days, they are often seen as catalysts for volatility. These participants, motivated by quick wins, react keenly to market trends.

When to buy, when to sell? The critical phases of accumulation and sale

During market, or Bear-Market, troughs, long-term holders seize the opportunity to buy massively.

This is with a view to seeing an upward cycle arrive in the months and years that follow. This purchasing period inevitably manifests itself in increased activity among this cohort, often followed by (very) lucrative sales. So they can reward themselves for standing by their convictions.

Finally, for them short-term volatility does not come into play in their action plans.

Visual representation of the accumulation or distribution phases of BTC holders of +155 days – Source : Checkonchain

Conversely, short-term investors, driven by enthusiasm or fear of the market, are often ready to sell at market bottoms and buy at peaks. They thus act as exit and entry doors to execute the long-term plan of the holders.

Unfortunately for them, distribution phases are not necessarily synonymous with profits.

Detection of tipping points

As we have just seen, the accumulation cycles of seasoned investors frequently coincide with market bottoms.

Even if they are long-term investors, they are also susceptible to taking profits, when the price of Bitcoin begins to reach profitable levels interesting for them.

This information offers valuable clues about the next moves to come in the cycle.

The distribution periods of the most seasoned investors (in blue on the graph) vary and reveal interesting trends:

Indeed, for 2023-2024 it has lasted for 148 days. If we compare this information with previous cycles, there are 152 days in 2021 and an impressive record of 722 days in 2017.

In blue, the market share of Long-Term Investors. In red, those of young investors. We notice when short-term holders reach a peak of accumulation, this corresponds to the peak of the market itself.In blue, the market share of Long-Term Investors. In red, those of young investors. We notice when short-term holders reach a peak of accumulation, this corresponds to the peak of the market itself.
In blue, the market share of long-term holders. In red, those of investors of -155 days- Source : Glassnode

Although the distribution peak has always been observed during the market peakit is difficult to get an idea of ​​how much time we have left to see the end of this phase arrive and an upcoming All Time High for Bitcoin.

In addition, the proportion of supply sold decreases from one cycle to the next. This reinforces the idea of ​​increased maturity and patience among these investors. This still highlights the hypothesis that this distribution is potentially not finished!

Indeed, young investors currently hold 23% of Bitcoin supply compared to 31% in 2021 and 42% in 2017.

Strategy in times of crisis

During periods of market declines, long-term holders often demonstrate a remarkable ability to maneuver strategically to optimize their positions.

Unlike the often impulsive reactions of novices, these market veterans are exploiting the low prices resulting from general panic to increase their BTC portfolios.

This methodical approach is not dictated by a stroke of luckbut is based on in-depth analysis and experience of the cyclical behavior of cryptocurrency markets.

We are observing a change in trend between long-term investors who are starting to accumulate again versus short-term investors who are starting to lose shares of the supply.We are observing a change in trend between long-term investors who are starting to accumulate again versus short-term investors who are starting to lose shares of the supply.
Change in trend between investor cohorts – Source : Checkonchain

Recent on-chain data confirms this trend:

There is again an increase in accumulation by long-term investors. This can be interpreted in two ways:

Or as a leading indicator of a possible recovery in prices, which would aim for new highs.

Or simply that the current BTC price is at interesting levels, which follows their long-term investment strategy.

Long-term investors, says Long-term investors, says
Long-term investors, known as “hodlers”, also accumulate during a bullish cycle – Source : Checkonchain

By capitalizing on market corrections, long-term investors are often ahead of trends. They position themselves to maximize profits during upward market reversals. This demonstrates not only a deep understanding of cycles, but also an ability to act against general market sentiment. Indeed, it is often dominated by fear as we see it currently.

This study of investor behavior in the face of Bitcoin cycles demonstrates the importance of understanding the motivations and actions of different market players. By carefully observing these dynamics, we investors can better navigate the complex landscape of cycles, thereby maximizing our chances of long-term success.

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