Experts Believe Long-Term Bitcoin Holders Liquidating Their BTC is a Bullish Development

Bitcoin’s Long-Term Holders Shift Assets, Indicating Bullish Market Outlook, Analysts Report

In traditional financial markets, large sell-offs by long-term investors often signal a downturn. However, in the cryptocurrency market, the scenario plays out differently. Analysts tracking Bitcoin’s long-term holders, or wallets with coins held for over five months, interpret their distribution of assets as a sign of potential upside.

Markus Thielen, the founder of 10x Research, explained that reductions in the supply held by long-term investors have frequently coincided with strong Bitcoin rallies in previous cycles. He pointed to 2024’s Q1 and Q4 as examples where such declines were followed by significant price increases. Thielen added that as long as long-term holders continue to distribute their Bitcoin, the market could experience a short squeeze pushing prices higher.

As of now, long-term holders control about 13 million BTC, Glassnode data shows. During Bitcoin’s recent rise above $100,000, more than 1 million BTC shifted from long-term holders to short-term traders, who eagerly absorbed the new supply. Glassnode reported that 1.1 million BTC were transferred from long-term to short-term wallets, which reflects strong demand for Bitcoin at prices exceeding $90,000.

However, the rate of selling by long-term holders has slowed. Glassnode’s analysis reveals that the monthly change in the ratio of long-term to short-term holdings is moderating, indicating that long-term holders are adopting a more deliberate approach to selling their coins.

BTC Flow to ETFs Suggests Healthy Demand, Analysts Say

Bitcoin held in centralized exchange wallets has decreased to 2.7 million BTC, down from over 3 million BTC six months ago, according to Glassnode. This decline in exchange reserves is generally viewed as a bullish sign, as it reduces available supply for immediate sale.

However, Glassnode notes that much of this Bitcoin outflow is directed into exchange-traded funds (ETFs), primarily those managed by custodians like Coinbase. These ETFs offer liquidity and can be traded just as easily as the underlying Bitcoin itself, meaning that while it may appear that Bitcoin is leaving exchanges, much of it is simply being reshuffled into alternative investment vehicles.

After accounting for Bitcoin transferred into ETFs, Glassnode estimates that more than 3 million BTC remain in such vehicles, pointing to a less drastic supply shock than some market participants might believe. Nonetheless, the trend of Bitcoin moving into ETFs, rather than being sold off, remains a bullish indicator of sustained demand and a healthy market outlook for Bitcoin.