Glassnode: Who is buying cryptocurrencies in the current market situation?

Author: CryptoVizArt, UkuriaOC, Glassnode; Compiler: Baishui, Golden Finance

Summary

• After several months of relatively heavy distribution pressure, the behavior of Bitcoin holders appears to be shifting towards holding and accumulation.

• Activity in the spot market indicates that there has been a clear increase in seller pressure recently, and this trend has not yet completely subsided.

• Compared to ATH breakthroughs in past cycles, the proportion of network wealth currently held by the long-term holder group is relatively large.

• Overall, on-chain conditions indicate that the Bitcoin holder group is confident.

Large wallets return to cryptocurrency holding mode

As the market begins to slowly recover from last week's sell-off, there is clear uncertainty and indecision among digital asset investors. However, when analyzing the on-chain reaction of investors to these turbulent market conditions, a trend toward holding begins to emerge.

Since Bitcoin’s all-time high in March, the market has experienced a period of broad supply distribution, with wallets of all sizes participating. Over the past few weeks, this trend has shown early signs of reversing, especially for the largest wallets typically associated with ETFs. These large wallets appear to be returning to accumulation mode.

The Accumulation Trend Score (ATS) indicator assesses the weighted balance change across the market. The indicator also suggests that the market is shifting towards accumulation-dominated behavior. The aforementioned shift towards accumulation prompted the ATS to record its highest possible value of 1.0, suggesting significant accumulation in the market over the past month. This observation is consistent with the long-term holders (LTH), who divested heavily before setting new all-time highs. This group has now reverted to a preference for HODLing, with a total of +374k BTC moving into LTH over the past 3 months.

From this, we can infer that investors’ propensity to hold tokens has now become a greater force relative to their pressure to spend.

We can also evaluate the 7-day change in LTH supply as a tool to assess the rate of change in its total balance.

We can see a significant LTH distribution, typical of a macro top formation, heading into the March ATH. Only less than 1.7% of trading days recorded greater distribution pressure. Recently, this indicator has returned to positive territory, indicating that the LTH community expressed a preference to hold its tokens.

This is despite the fact that from April to July, the spot price has been above the active investor cost basis, which represents the average acquisition price of active tokens in the market.

The active investor cost basis can be regarded as a key threshold that divides bullish and bearish investor sentiment. As the market has managed to find support around this level, it indicates a degree of underlying strength in the market, suggesting that investors generally still expect positive momentum in the market in the short to medium term.

Assessing the Bias in the Spot Market

When the market is in a technical downtrend, we can employ the CVD indicator to estimate the current net balance between buying and selling pressure in the spot market.

This indicator, in turn, can be used to assess medium-term market momentum, as well as any headwinds or tailwinds to price. Since the new ATH was formed, we have noticed a persistent mechanism of net seller pressure.

A positive CVD value indicates net buying pressure, while a negative value indicates net selling pressure.

When we analyze the annual median of spot CVD, we can see that the median has fluctuated between -$22 million and -$50 million over the past 2 years, indicating a net selling bias.

If we consider this long-standing median as a baseline for CVD equilibrium, we can generate an adjusted indicator variable to account for and correct for this implicit seller bias.

An interesting convergence can be seen when comparing the adjusted spot CVD (30d SMA) to the monthly percentage price change.

In this framework, the recent failure to break above the $70,000 region can be partially attributed to weak spot demand (negative adjusted CVD). Alternatively, a potential recovery in spot market demand can be confirmed when the adjusted CVD indicator returns to positive values.

Cyclic Fluctuations

The sideways price fluctuations in recent months have led to a significant slowdown in the distribution pressure on LTH. This has caused the percentage of network wealth held by this group to first stabilize and then start to grow again.

Despite the huge seller pressure exerted by LTH to the market ATH, the wealth held by long-term investors is still at a historical high compared to the previous historical high.

This indicates that if the price of BTC rises in the future, LTH may face further withdrawal pressure. This also shows that despite the recent sideways or even downward price, these investors are increasingly unwilling to sell their tokens at lower prices.

Both of these observations suggest a more patient and resilient community of holders despite volatile market conditions.

Finally, we can use the LTH Sell Side Risk Ratio to support this assessment. This tool measures the absolute sum of realized profits and losses locked in by investors, relative to the size of the asset (realized market cap). We can think of this metric in the following framework:

• High values ​​indicate that investors are making large profits or losses relative to their cost basis when spending tokens. This situation suggests that the market may need to re-find equilibrium and is usually seen during times of high price volatility.

• Low values ​​indicate that most tokens are being spent relatively close to their breakeven cost basis, indicating that a degree of equilibrium has been reached. This situation usually indicates that the "profit and loss" within the current price range has been exhausted, and usually describes a low volatility environment.

The LTH Seller Risk Ratio remains at a low level compared to previous ATH breakouts. This means that the margin of profit made by the LTH group is relatively small relative to previous market cycles. It also means that the group is waiting for higher prices before increasing its allocation pressure.

Summary

Despite the challenging and volatile market environment, long-term Bitcoin holders remain steadfast, with evidence that they are increasing their holdings.

This group of investors holds a higher percentage of Bitcoin network wealth than at the highest levels of previous cycles, suggesting that investors are showing a degree of patience and waiting for higher prices. Furthermore, during the largest price contraction of the cycle, this group of investors did not panic sell, highlighting the resilience of their overall conviction.