Bitcoin Price Discovery Driven By Unique Holder Phenomenon

The key takeaways

• The Bitcoin supply continues to grow, despite the fact that long-term Bitcoin owners are taking profits.

• Bitcoin volatility dropped to its 10th percentile – the lowest in more than a decade. Prices are still near record highs.

Bitcoin (BTC) Glassnode, a provider of onchain analytics, has revealed that the price hovers just a few percentage points below its previous high. “unique dynamic of this cycle,” Even at the end of the bull run, long-term investors continue to dominate the distribution of wealth. The behavior of this cycle is radically different from the previous ones.

Data is available on the website. highlights that long-term holders (LTHs)—those holding BTC for over 155 days—are realizing significant profits, with their net realized profit/loss peaking at $930 million per day. LTHs’ total supply is increasing despite the fact that they are holding more BTC. At this stage in a rally the LTH supply is usually declining due to widespread profits-taking. 

The dynamic is that, while long-term holders are selling their coins, a larger number of coins will mature into long-term status. The report called this an “unique duality” In the market structure where accumulation is greater than selling pressure. The change in behavior of holders can be attributed mainly to institutional investors, and US Bitcoin ETFs that favor long-term storage. 

The realized profit/loss is also a good indicator of late cycle behavior. It currently stands at 9,4 and indicates that the majority of long-term coin purchases have resulted in a substantial profit. Such levels have historically been associated with market optimism and usually preceded a cycle or local top. They can, however, persist for many months when demand remains strong.

Related: Michael Saylor rejects crypto winter fears, says Bitcoin ‘going to $1M’

Price discovery could become more difficult as Bitcoin’s volatility increases.

Bitcoin’s volatility is currently a paradox. In recent weeks, the realized supply density (which measures how concentrated Bitcoin ownership is at current prices) has increased. It is clear that many investors purchased around $105,000 to $110,000. Minor price fluctuations can cause outsized trading or emotional responses in such tight clustered environments. This increases the risk of sudden volatile.

In contrast, the market for derivatives is sending out contradictory messages. At-the-money implied volatility (ATM IV)—a gauge of expected future price swings derived from Bitcoin options pricing—continues to fall across all timeframes. The traders’ reaction suggests they are not expecting any significant price movements in the near term.

Likewise, data Ecoinometrics’ data shows that Bitcoin volatility is now at the 10th centile. This is lower than 90% weeks over the past ten years. Bitcoin also set a new high in May and rallied strongly. The drop in volatility could be a sign that Bitcoin has entered a new phase, with strong performances without wild price fluctuations., It is attractive to institutional investors looking for risk-adjusted return.

The market is stable but tight-knit, with BTC’s price at the top of an intense supply cluster, and institutional flows anchoring the demand. Bitcoin’s volatility could be pushed through the roof if new demand exceeds profits. If sentiment begins to crack, then the drop may be more dramatic than anticipated.

Related: How high can Bitcoin price go?

This article contains no investment recommendations or advice. Each investment or trading decision involves some risk. Readers should do their own research before making any decisions.