wealth transfer is underway


Key facts:
  • New investors are beginning to flock to bitcoin, attracted by the high price.

  • High levels of profit taking are detected.

Glassnode, a company that provides data and analysis of the cryptocurrency market, published a report that explains the rise of bitcoin (BTC) and its possible whereabouts.

“The classic transfer of wealth from the cohort of hodlers (long-term investors) to speculators is already underway,” the report states. In principle, he distinguishes two factors that show this.

One factor is that, as bitcoin trades at new all-time highs, selling pressure on coins purchased months or years ago at cheaper prices is accelerating. And the other is that the proportion of “young” supply grows.

This can be seen in the chart below, which shows the proportion of coins moved in three months. This increased from 16% to 40% from October 2023 to March 2024. Glassnode highlights that this transfer of wealth from old investors in the market to new ones “is a classic pattern of bitcoin bull markets.”

In orange you can see the bitcoins moved in 3 months. Source: Glassnode.

As seen in the chart, typically the price of bitcoin has reached a cycle peak when this metric exceeded 60%. Therefore, if this happens again, it may mean that the currency is not yet close to ending its current bullish streak. Right now, it is trading around $73,000 (USD), its all-time high.

Short-term investors bought more than 800,000 BTC

Glasnode also highlights that, in five months, long-term investors got rid of 660,000 BTC and short-term investors accumulated 810,000 BTC, as seen below. With such data, he indicates that, as ancient hands sell coins to take profitssupply pressure is absorbed by an influx of new demand attracted by high prices.

The blue line shows the supply of bitcoins stored in the long term (more than 155 days) and the pink in the short term (less than 155 days. Source: Glassnode.

“The challenge for analysts is to identify the periods in which this distribution pressure may be reaching a point of oversaturation and exhaustion of new demand,” he warns. Although, for now, demand looks dominant with price rise.

As reported by CriptoNoticias, this scenario occurs while massive purchases have been made of the bitcoin exchange-traded funds (ETFs) launched two months ago in the United States. Some specialists and investment companies, such as Hashdex, maintain that, as long as this continues, the price of the currency could reach USD 200,000 by 2025.

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