Bitcoin shifts from speculators to long-term holders

Bitcoin is increasingly shifting from speculative hands to long-term investors. The share of short-term holders (STH) is falling to 23%, a level previously only seen during the bottoming phase of 2022 to 2023. At the same time, long-term holders are approaching historical peaks in their holdings. The Bitcoin price currently stands at $63.800, with a slight loss of 0.3% in the past 24 hours.

Bitcoin is available at OKX and Bybit.

In brief:

• The share of short-term holders drops to 23%, the lowest point since the bottoming period of 2022-2023.
• Long-term holders are approaching historically high levels in their Bitcoin holdings.
• Coins are being traded less frequently, but demand for Bitcoin has yet to recover.

What do the STH HODL waves tell us?

Analyst Axel Adler Jr. shares a chart of the so-called STH HODL waves, a metric that shows which portion of the Bitcoin supply has recently changed hands. An STH is typically someone who holds their Bitcoin for less than six months. That share now drops to 23%, which historically coincides with periods when speculators leave the market and more patient investors take over.

This pattern is reminiscent of what happened between late 2022 and early 2023, when Bitcoin formed a bottom after a severe correction. The coins move less frequently from address to address, indicating that holders are holding on to their holdings rather than selling or trading. As previously noted, trading volumes in the market have been subdued for quite some time.

Demand still lags behind despite the shift

Although the shift towards long-term holders is in itself a constructive signal, Adler points to an important caveat: demand for Bitcoin has not yet recovered. More holdings in the hands of patient investors do not automatically mean the price will rise. New capital inflows are also needed for that, and they have yet to materialise. The spot volume in July is the lowest level that the market has seen since November 2023.

Adler indicates that a specific signal is needed to confirm a genuine turnaround. In his full analysis, he describes exactly what that signal is. In his view, the combination of low activity and high concentration among long-term holders makes the market vulnerable to a sharp move once demand returns, but the direction of that move depends on what happens with capital inflows.