New metric suggests Bitcoin holders sold off above $20K

According to new research, Bitcoin (BTC) is currently in a “transition” phase, which is expected to lead to the next bull market top.

In its latest weekly newsletter, “The Week On-Chain,” analytics firm Glassnode introduced its latest tool for tracking Bitcoin’s resurgence.

Bitcoin hodlers in “transition”

On-chain metrics have gone through a broad transformation since the 2022 bear market and signs of recovery in Q1 of this year, with many suggesting that a long-term BTC price bottom has already been reached.

However, since mid-March, price action has stagnated, and doubts have returned, along with downside targets that stretch toward $20,000.

Despite this, Glassnode analysts believe that Bitcoin’s long-term investor base is already preparing for better times ahead.

Using existing on-chain tools, analysts have introduced a new way of tracking sentiment among these long-term holders (LTHs) – those holding BTC for at least 155 days.

The tool, “Long Term Holder Spending & Profitability,” splits LTH behavior patterns into four phases.

After a period of “capitulation” at the end of 2022, LTHs have begun a “transition” toward a state of “equilibrium” before the full “euphoria” – the next BTC price cycle top – hits.

Capitulation is defined as a situation in which “spot price is lower than the LTH cost basis,” with significant LTH spending likely due to financial pressure and capitulation.

Transition, on the other hand, is when the “market is trading slightly above the long-term holder’s cost basis, and occasional light spending is part of day-to-day trade.”

The LTH cost basis, as of May 30, is around $20,800, according to separate data.

“Our current market has recently reached the Transition phase, flagging a local uptick in LTH spending this week,” “The Week On-Chain” commented:

“Depending on what direction volatility erupts next, we can employ this tool to locate local periods of overheated conditions, as observed from the lens of Long-Term Holders.”

“Seeking equilibrium” – but for how long?

In addition to LTHs, Bitcoin’s short-term holder (STH) cohort, which corresponds to more speculative investors, is also on the radar.

Related: Bitcoin risks ‘new lows’ into monthly close as BTC price retests $27K

Glassnode previously stated that speculative activity has increased in 2023, making their cost basis – at around $26,000 – an increasingly important level.

However, BTC/USD has remained within a narrow range, trading within a $5,000 corridor for almost three months, according to data from Cointelegraph Markets Pro and TradingView.

“The digital asset market continues to outperform major commodities in 2023, however all are currently experiencing a meaningful correction. Having recovered from the depths of the 2022 bear market, Bitcoin investors find themselves in a form of equilibrium, with little gravity in either direction,” the newsletter summarized.

“Given the extremely low volatility, and narrow trading ranges of late, it seems this equilibrium is soon to be disturbed.”

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