Collapse of Crypto Exchange FTX Sees Long-Term Bitcoin Holders Shift to Distribution
A sustained decline in bitcoin owned by long-term holders may mean a widespread loss of conviction, Glassnode said.
Long-term bitcoin (BTC) holders' resolve to keep building their coin stashes has weakened amid fears that the implosion of crypto exchange FTX will prolong the crypto winter. The exchange, founded by entrepreneur Sam Bankman-Fried and formerly the third largest in the world, filed for bankruptcy last week.
The change in stance is notable because the investors weren't fazed in the third quarter even as macro traders left the market, keeping bitcoin resilient to the macroeconomy-induced turmoil in traditional assets. Their shift now to distribution from accumulation perhaps represents concern about the strength of the market following FTX's collapse.
"There has certainly been a degree of immediate panic within the HODLer cohort," analytics firm Glassnode said in a weekly report published Monday, referring to the decline in the supply owned by long-term holders and the movement of inactive coins.
The total amount of circulating supply owned by long-term holders has declined by 61,500 BTC ($1.03 billion) since Nov. 6, marking a shift away from accumulation observed between the end of June and early November, data published by Glassnode shows.
Another metric, the long-term holder net position change, shows more than 48,000 BTC were spent in the week ended Sunday. Glassnode defines long-term holder supply as the one that is statistically the least likely to be spent. In addition, more than 97,000 BTC that were inactive or dormant for over a year moved last week and possibly returned to the cryptocurrency's circulating supply.
According to digital assets data provider Amberdata, FTX's implosion will have many consequences, including the "potential demonization of crypto space politically and a daisy chain of balance sheet capital short-falls for various institutions." Some analysts studying chart patterns see bitcoin falling to $13,000 in the near term.
While long-term holders have begun distributing coins, it's still too early to call a long-lasting bearish shift in sentiment, according to Glassnode.
"A sustained push higher in older coins being spent, and a decline in LTH supply would be clear warning signs that a more widespread loss of conviction and concern may be in play," Glassnode noted, using an acronym for long-term holders.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.