Approximately a year ago, individuals engaging in long-term HODLing, known as LTHs, possessed 13.84M Bitcoin (BTC) at an average cost of $42k. Presently, this figure has dwindled to 12.22M BTC, representing an 11% decline over the span of a year. These HODLers, renowned for accumulating assets amid selling trends, are exhibiting a shift in their behavior.
Interpreting the Significance: Market Alarming or Indicative of Progress?
Let’s revisit the year 2023 – the commencement of Q1 witnessed BTC at $16.6k, with 14.93 million BTC stored in LTH wallets. By the conclusion of the year, BTC had advanced to $44k, accompanied by an increase in LTH holdings to 15.85 million. The consistent accumulation by LTHs significantly influenced BTC’s upward trajectory.
Fast forward to 2024 and a noticeable transformation is occurring. LTHs have begun an extensive distribution phase, witnessing a decline in holdings from 15.8 million to 14.27 million solely in Q4. Evidently, these HODLers have taken advantage of lucrative opportunities, particularly during the rise catalyzed by external factors like the ‘Trump trade’.
Given the extraordinary 502% surge in Bitcoin’s value across two years, the decision of these HODLers to cash out is not surprising. As Bitcoin increasingly aligns with macroeconomic shifts, their actions are becoming more rational.
Nevertheless, LTHs are known for their ‘contrarian’ approach – opting to buy when the majority is selling. Thus, their recent exit raises a pertinent question: Is this a demonstration of the market’s sophistication or could it signal impending challenges for Bitcoin?
LTHs Exiting – Implications for Bitcoin’s Endurance?
Recent events witnessed Bitcoin experiencing a downward trend, dropping to $89k, a value not observed since the middle of November. However, an impressive turnaround followed, with Bitcoin rebounding swiftly to conclude the session at $95k.
Prominent institutions are stepping up to mitigate the pressure. Take, for instance, MicroStrategy (MSTR), which within a mere two weeks of 2025, executed two substantial BTC purchases. Their latest investment of 2,530 BTC for $243 million significantly impacted Bitcoin’s recovery.
Undoubtedly, these LTHs are adhering to their contrarian strategy, affirming their readiness to seize opportunities during market downturns.
Nonetheless, there is a pertinent observation to be made regarding Bitcoin’s Long-Term Holder (LTH) SOPR, which has indicated diminishing returns post each halving event. As Bitcoin’s availability decreases, LTHs are witnessing reduced profits.
For instance, in 2013, the average LTH SOPR stood at 9.72, which by 2021 had decreased to 3.87. If this pattern persists, there is a possibility of further decline to a mere 2.44 by 2025.
Technically, in this scenario, LTHs are confronted with a decision – either accumulate more BTC to maintain profits or exit the market before the situation worsens. Evidently, many have chosen the latter.
Evidently, pressure is mounting. To avert a substantial downturn, a supply shock might be necessary, and currently, this responsibility rests in the hands of significant market participants.