Long-Term Bitcoin (BTC) Holders Are Selling, and That's a Bullish Sign

The narrative, however, differs in the crypto market, where such selling indicates bullishness, according to analysts observing historical trends

As the price of bitcoin (BTC) continues to rally, reaching new all-time highs above $110,000, a key metric that has historically signaled bullishness is also unfolding.

According to several analysts, the selling pressure from long-term holders, defined as those who have held their coins for at least 155 days (around five months), is being absorbed by short-term traders, who are snapping up BTC at record highs.

This dynamic is highlighted by the flattening long-term holder supply, shown in purple on the below chart from 10x Research. Notably, this metric serves as a proxy for the supply available on exchanges.

"Based on our analysis, sharp declines in long-term holder supply (purple line) have frequently coincided with strong bitcoin rallies (white line), as seen in Q1 and Q4 of 2024," 10x Research founder Markus Thielen stated in a report shared with CoinDesk. "As long as long-term holders continue reducing their balances, bitcoin remains at risk of a short squeeze to the upside."

Moreover, data from analytics firm Glassnode shows that over 1 million BTC have moved from long-term to short-term holders during the recent price rise above $100,000.

"During the recent rally above $100K, 1.1M BTC have transferred from long-term to short-term holders, representing an impressive inflow of demand to absorb this supply at prices above $90K," Glassnode noted in its weekly report.

However, it's worth mentioning that the pace at which long-term holders are selling has slowed down recently. This change can be observed in the monthly rate of change in the long-term to short-term holder supply ratio, which is no longer as drastic as it was earlier this month.

This slowdown indicates a more measured approach to selling by long-term holders.

Bitcoin’s Exchange Balance Slides to 2.7M BTC

Separately, the total amount of BTC held in wallets linked to centralized cryptocurrency exchanges has declined to 2.7 million BTC, down from over three million about six months ago, Glassnode reported.

This exodus of BTC from exchanges, which results in reduced availability of coins for quick sales, is usually regarded as a bullish indicator. However, the dynamics have shifted since the debut of spot exchange-traded funds (ETFs) in the United States last year.

"Many interpret this as a form of supply shock caused by a mass of coins being withdrawn by individual investors—potentially creating upward price pressure," Glassnode stated. "We believe the majority of this decline stems from coins reshuffling into ETF wallets managed by custodians like Coinbase."

In other words, these coins have ended up in an ETF, which is a liquid or active alternative investment vehicle that can be bought and sold just as quickly as actual coins.

When adjusting for the coins that have been moved to alternative vehicles, the exchange balance stands at over 3 million BTC, as per Glassnode.