Currently, a record-high number of Bitcoin is owned by long-term holders. Bitcoin coins in turn are getting scarcer and scarcer. The reason for this is that a large part of the available Bitcoin is actually held by long-term holders, according to a recent analysis by Glassnode.

Record High: Long-Term Bitcoin Holders

76 percent of Bitcoin available is now in the hands of long-term holders, which is a record number in the whole history of the currency.

Although the overall supply of Bitcoin steadily increases due to the mining process, the majority of the eventual investors happen to have the intention of low-time investments, aspiring for larger incomes in the future.

Long-Term Investment Surge in Bitcoin

According to Charles Edwards, the founder of quantitative Bitcoin and digital asset fund Capriole Investments, this is the most significant mark in the history of Bitcoin, beating the record of 2015. The consequence of this ever-increasing number of LTHs is that the number of coins available for new buyers is increasingly scarcer. In other words, as more Bitcoin is held for the long term and taken out of circulation, there are fewer coins available for new buyers, traders, or short-term investors. The long-term holders kept their Bitcoin investments throughout the entire period of the bear market that followed mid-2021, indicating a strong belief in the long-term value of Bitcoin despite short-term price declines. The number of coins they were “hodling” relatively decreased only a few times since.

 

Read also: 2024 Bitcoin Halving: A Departure from Historical Trends?

Later Edwards additionally mentioned in his private comments for Cointelegraph, that the general demand for Bitcoin while fluctuating tends to increase, with the increasingly reducing number of coins in circulation. The potential consequences of this trend are:

    1. Price volatility affected: Since long-term holders buy and hold their investments for extended periods, often regardless of short-term market fluctuations, the price volatility may generally reduced, which eventually may have a stabilizing effect on the market, given that LTHs are less likely to sell their holdings in response to short-term price movements.
    2. Supply and demand dynamics: Since a large number of long-term holdings reduced the number of coins available for traders, reducing in other words the supply, the demand for BTC increases, which can lead to price stability or appreciation, as there are fewer units available for trading or purchase.

Long-Term Investment Surge in Bitcoin

 

  1. Market confidence and sentiment: The fact that the long-term holding of BTC is so widespread can be seen as a consequence of confidence in the future value of Bitcoin.
  2. Reduced impact of speculative trading: Since there are fewer coins in circulation, the overall potential of speculative trading reduces. Given that these are speculators often responsible for price swings and volatility, a higher stability of the currency is expected.
  3. Potential for liquidity crunch: On the other hand, a large quantity of currency concentrated in the hands of the same traders may lead to reduced market liquidity. In other words, it’s harder for new investors to enter the market or for existing investors to exit. This results in an ambiguous effect on stability, with more pronounced price movements when large volumes of BTC are suddenly sold or bought.
  4. Reaction to market crises: The behavior of LTHs in response to market downturns or crises is also crucial. If LTHs go on storing their assets during market downturns, this can contribute to stability preventing large-scale sell-offs. Conversely, if during a crisis numerous LTHs decide to liquidate their holdings, this can destabilize the market.
  5. Indicator of market maturity: Another thing that might be indicated by this growing presence of long-term hodlers is that maturity of the market, as a mature market tends to be more stable, with more insignificant price swings and more predictable, rational behavior from participants.

Impact of Long-Term Holders on BTC Stability

 

Bitcoin’s Landscape: Holders vs. Speculators

At the same time, according to Cointelegraph, short-term hodlers (STHs) or speculators, being the opposite of long-term hodlers, also present an interesting object for those observing the market. The realized price, that is the average price at which the Bitcoin currently held by short-term holders was last bought or moved is just under $27,000, and it has functioned as support for a large part of the year. According to data from Cointelegraph Markets Pro and TradingView, Bitcoin has recently reached a price higher than it’s been in two months and is maintaining a level (of support) at around $28,000. This means that after reaching these highs, Bitcoin’s price hasn’t fallen below $28,000, indicating strong market support at this price level.

In August, compared to previous periods, the amount of Bitcoin that STHs hold or are exposed to was at a lower level than usual, which was detected by the analysts.