Long-Term Holders Stopped Selling. Here's Why! (Data Inside)

[00:00:00]This is the golden metric for Bitcoin, the realized price. Whenever we are below the average cost basis of the market, we tend to see a less selling pressure, we tend to turn around.

[00:00:12]Currently, that realized price is at $53,000, and once we fall below that, we might approach the end of the bear market. The long-term holders have already stopped selling a while ago, and with every little dip, we see the retail investors buying in more and more aggressively.

[00:00:28]Please don't get distracted by the headlines. The ETFs, for example, don't matter that much. It's really the on-chain movements that move the price.

[00:00:37]In the end, the ETFs still just hold roughly 5% of Bitcoin's supply. Another 5% is held by Michael Saylor, so by the treasury companies, but it's the 90% that matter. As long as the market is cooling off, so there's less and less short-term holders active on the Bitcoin blockchain, as long as the momentum goes down, I tend to stay cautious. I want us to be in the green area again. Now, nobody knows for sure where we turn around, and there are some signals that suggest that maybe now is already the right time to buy. Because there is this uncertainty, we need to have some kind of an allocation that we always hold, and potentially, if we can stomach the volatility, and we just hold for another two, three, four years, and we don't look at Bitcoin at all, then maybe now is already a good time to buy. The reason why I say so is the following.

[00:01:26]This is the long-term holders and how much they have capitulated each cycle.

[00:01:31]How much loss has been realized? In other words, if a long-term holder bought, then the price went down, and then they decided to sell anyways, despite not being in profit, that's when this orange line goes up. Now, we are currently at very comparable levels to the capitulation in 2022 and 2023, right? The Three Arrows Capital and the FTX collapse. However, there's something important here, and that's why it's so important to be critical with charts like this. This chart, by the way, comes from Glassnode. Have a look at the Y axis. This is in US dollars per day.

[00:02:04]Notice how the capitulation in 2019 was much smaller in magnitude than in 2022-2023.

[00:02:12]Why is that? It's because the Bitcoin price at the time was much lower, right?

[00:02:17]We were only at 3 and 1/2 K at the bottom over here, but we were at 16 K at the bottom over here in the Bitcoin price. Thus, of course, measured in US dollars, the capitulation was much more amplified. Now, currently, the Bitcoin price is way above the 16 K mark. We are roughly four times higher. Thus, a real capitulation that's comparable to 2022-2023 should be four times more magnified.

[00:02:45]This chart is way too bullish optically.

[00:02:48]It looks like we have already capitulated, but really that's just in US dollars, and they don't really matter. What matters is the Bitcoin price adjusted capitulation, and that shows in the comparison of the first and second cycle. Now, here's something very important to understand, and I see how many people get this wrong because in the comments, sometimes there is something like, "Last week, you have been bullish. Now, you are bearish." The reason why there's sometimes this perceived difference, in my opinion, is because I talk about different time horizons. Everything that I talked about up until this point in this video was rather short to medium term. Right? I don't think that we are at the end of the bear market. That does not mean that I don't believe in Bitcoin long-term. I still think that Bitcoin, 4, 5, 6 years from now, will be much higher compared to where it is today, and there are fundamental reasons for that, reasons that we can also measure in the data.

[00:03:40]Now, this chart might look a bit intimidating, but it really is not. What you've got here is the HODL Waves chart.

[00:03:47]So, this looks at all of Bitcoin supply, normalized to 100% because, of course the number of Bitcoin that's floating around changes over time with Bitcoin mining but we're just looking at all of the Bitcoin and then we check how much of that Bitcoin has moved in the last 24 hours or in the last week or in the last month etc. So we can see up until this point Bitcoin hasn't been around for 10 years but then once it hit the 10-year mark we can see the percent of BTC that has never moved for 10 years. And then we've got another sliver over here which Bitcoin did not move for the last 7 years etc. So we can sub select this and this is now all the Bitcoin that has not moved for at least 5 years. This is extremely useful and here's why. If we ignore all the Bitcoin mining if we ignore the supply expansion we just look at the Bitcoin as a fixed pie. We still see that over time more and more Bitcoin relatively speaking gets locked away. It doesn't move. It exits circulating supply. Now we don't know why the Bitcoin doesn't move if this is just very long-term holders or if the Bitcoin has been forgotten somewhere or if the private keys got lost. We don't know but actually the reason doesn't matter that much. The only thing that matters is that that Bitcoin is not getting bought or sold anymore. And so the amount of liquid Bitcoin shrinks further and further. Right? Think about this this way. Let's say there's property and let's say most of the property in the market is completely illiquid because everybody wants to just hold their property maybe the house that they live in they don't really want to sell this and then somebody wants to buy more property. That buyer has to fight very hard in order to acquire something right? They have to bid up that house quite a lot in order to see one person saying okay now I'm selling. In other words the less liquid an asset becomes because more and more of that asset is just held by very strong hands, the higher it can potentially go. Or if you look at the inverse, so that's now the liquid Bitcoin, less and less of Bitcoin supply is available for active trading.

[00:06:02]Now, why did I make the cutoff at 5 years? The reason is, once we at the 3-year mark, we do have periods where this is not going up. So, up to 5 years holding, this is almost monotonic increasing.

[00:06:16]But once we include 3 to 5 years, we do have periods where some people sell their BTC. When does that happen? It happens when Bitcoin rallies a lot, right? It went from $200 all the way to $20,000, a 100x increase. You cannot expect that when something goes up by 100x, that nobody takes profit. Of course, people take profit. It took a long time till the end of the bear market to see that graph turn around again. But there's something else very important here. The sell-off during the last 10x of Bitcoin's appreciation, right? From 2K to 20K, that was quite aggressive. But this time, with the rally, the profit taking is much more modest. So, in other words, from top to bottom, the profit taking is declining, relatively speaking. People tend to hold their Bitcoin more long-term now. People aren't that eager to exit the strongest of their assets anymore. Now, there's a good reason for that, even after including the Bitcoin mining, so the supply expansion of 0.8%.

[00:07:21]If still, afterwards, the number of liquid Bitcoin shrinks over time, then of course, measured in US dollars, it has to recover at some point, because the number of US dollars that are floating around grows by 6.8% per annum. So, we don't just get the 6.8% expected return, we also get a premium on top of that because more and more Bitcoin gets gets stashed away.

[00:07:46]Let's take the last 10 years. This went up by at least 15% points since then.

[00:07:53]So, that's another 1 and 1/2% at minimum of additional price appreciation per annum. Very likely more because every dollar that enters the space is increasing the market cap by more than a dollar. Again, imagine it this way, right? We've got 100 houses and every house is worth exactly 1 million. Nobody wants to sell the house. Somebody comes in, wants to buy a house and is willing to pay something for it. He has to make quite a high offer in order to get that house. So, let's say he's willing to pay 2 million for it. Well, that then means for the market cap of all of those houses that are all completely interchangeable, right? Let's say they're completely fungible, they're all the same house. Let's say that market cap then moves from 100 million to 200 million. So, we've doubled the market cap of all of those fungible houses. We moved 100 million of market cap only with a single transaction worth $2 million. Somebody sold for a million, another person bought for 2 million.

[00:08:50]There's only 1 million of additional capital in the property market now, but that 1 million delta increased the market cap by 100 million. So, that's what happens with illiquid assets. And the more illiquid an asset is, the stronger this effect is. Thus, seeing Bitcoin becoming more and more illiquid is great because then the dollar cost averages, they have more and more of an impact on the Bitcoin price. Now, what does it mean for short-term trading? We do see that the short-term supply, so all the supply that has moved within the last half year, it tends to shoot up whenever the market gets hot, right? So, it's the short-term tourists that are now interested in the asset because the asset is going up. Those people leave when the market is cooling off. So, you want to sell to the short-term tourists.

[00:09:37]We want to sell when this is high. We want to buy when this is low. And this is currently at an all-time low. It doesn't mean it can't go lower, but it does mean that now is obviously a better time to buy compared to say half a year ago. This is not the right time to sell.

[00:09:53]Bitcoin will recover. The only question is when. And nobody has a crystal ball, but I want to see all the short-term trading activity going back down, being at similar levels to where Bitcoin turned around in the past. There will be a follow-up video. If you don't want to miss that, feel free to subscribe over here. A like would be very much appreciated as well. It helps the channel grow. If you want to see my trades, and I've been outperforming buying and holding Bitcoin over the last 5 years by 2.3% per month, then feel free to check out the premium membership. That's over here. There's also a 7-day money-back guarantee. Okay, so don't like premium, just message me within the first 7 days, and you will get refunded, no questions asked. Thanks for watching, and see you next time.

[00:10:30]Cheers.