Long-Term Bitcoin Holders’ Profit-Taking Sparks Concerns Over Market Stability

Market Shift Among Long-Term Holders

Recent analyses reveal that long-term Bitcoin holders are beginning to cash out, as evidenced by a notable decrease in their net positions over the last month.

This trend, particularly from typically steadfast investors often referred to as “diamond hands,” has raised alarm bells among analysts.

They stress that ongoing institutional investment is essential to maintain Bitcoin’s upward price trajectory. On-chain analytics firm Glassnode has identified a significant transition among long-term holders (LTHs)—those who have kept their Bitcoin in wallets for at least 155 days.

After about six months of accumulating Bitcoin, these investors have shifted gears to become net sellers.

As of November 20, data indicates that LTHs reduced their holdings by a striking 245,000 BTC, representing the steepest decline over a 30-day period since April.

Impact of Institutional Investment

Crypto analyst Miles Deutscher has pointed out that vigorous buying activity, especially from larger market players, is crucial to counterbalance the selling pressure from these long-term holders.

He specifically highlighted the importance of demand for U.S. spot Bitcoin exchange-traded funds (ETFs) in this context.

Deutscher cautioned that if significant inflows into ETFs do not materialize, the selling trend among long-term holders could significantly impact the market. The recent rise in options trading related to ETFs, coupled with record net inflows surpassing $770 million on November 20, raises questions about the market’s ability to maintain its upward momentum.

While these inflows are promising, they may not be enough to counter the selling actions of long-term holders, which could place downward pressure on Bitcoin’s price.

Profit-Taking and Market Dynamics

Moreover, Glassnode has reported that all Bitcoin investors are currently experiencing profits, a scenario that could soon shift market supply-demand dynamics.

The firm drew attention to the market value to realized value (MVRV) metric, which indicates levels similar to Bitcoin’s previous high of $73,800 in March.

They also noted that the price recently surged above the +1σ band, suggesting that many investors are sitting on significant unrealized gains.

This situation may prompt increased profit-taking among holders. Analysts have observed that in previous bullish cycles, the market has often moved into extended phases characterized by “overheated” conditions.

However, they also noted that such scenarios can remain sustainable if there is substantial capital influx to absorb the selling pressure. “`html

Source: Cointelegraph.com

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