Long-Term Buyers Unfazed by Bitcoin's Recent Drop to $33K

A metric tracking long-term holders suggests investors have continued to accumulate the asset despite a falling price.

AccessTimeIconFeb 3, 2022 at 10:52 a.m. UTC
Updated Feb 4, 2022 at 7:12 p.m. UTC

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Long-term bitcoin holders were not too bothered by the cryptocurrency's drop in the last few months, according to analytics firm Glassnode.

Bitcoin's price fell as low as $33,100 in the last week of January after beginning the year around $47,500 amid falling sentiment for risk assets. One of the biggest price drops came towards the end of January when bitcoin fell by $10,000 from Jan. 20 to Jan. 22, trading data shows.

Since then the crypto has recovered to $38,800, where it encountered resistance and then fell to $36,800 at the time of writing.

Despite the drop, bitcoin flows suggest long-term holders continued to add to their positions while short-term holders paused, according to metrics from analytics firm Glassnode.

Glassnode’s balance on exchanges metric, which tracks the amount of bitcoin held by wallets of crypto exchanges, reached 2.52 million this week – a level last seen in April 2021, when bitcoin reached an all-time high of $69,000. The metric gradually rose to over 2.7 million in July, before falling to 2.56 million in October, and has gradually fallen since.

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Balance on exchanges declined in recent months. (Glassnode)

Some analysts say asset movements out of exchanges, coupled with a price recovery and bitcoin holding support levels, is an overall bullish sign.

“The percentage of bitcoin on exchanges continues to decrease. Since the all-time high at $69,000, Glassnode shows that 42,900 bitcoin has left exchanges,” explained Marcus Sotiriou, analyst at crypto brokerage GlobalBlock, in an email to CoinDesk. “These indicators suggest that as the price has decreased by over 50% over the past few months, whales [large holders] have been accumulating, while short-term holders [are] capitulating."

Metrics for long-term holders, or bitcoin held by wallets for longer than five months, support this analysis. Data shows that nearly 100,000 bitcoins have been added to long-term holder wallets since December, despite a fall in prices. This suggests that long-term sentiment among traders remained intact despite short-term price falls.

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Supply held by long-term holders increased in recent months. (Glassnode)

Sotiriou pointed out that most bitcoin flows in recent times were from "young" coins, or those acquired by holders recently.

“High values for dormancy flow mean that old coins are moving,” he said. “Extremely low values, like we are seeing currently, show that most of the coins being transacted are young, suggesting that short-term holders are capitulating while long-term holders are holding/accumulating.”

Dormancy flow refers to the average number of days each coin remained dormant or unmoved before a transaction, a gauge of the market's spending pattern. In January 2022, the indicator reached values that have historically preceded a bullish trend on five occasions, as reported.

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Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.