Long-term holders are selling BTC: Why this is a bullish sign

On-chain indicators show that early Bitcoin is being sold as BTC price rises, suggesting that long-term holders are taking profits. While this may seem alarming to traders, historically this trend is extremely bullish.
In Glassnode’s recent on-chain weekly report, we looked at Bitcoin entity-adjusted ASOL (average spend output lifespan) data showing that older Bitcoins are being moved as the BTC price rises .

Earlier Bitcoins start to move during the latest bull run ( Glassnode Studio )

ASOL shows the average age of Bitcoin being traded. Higher prices (like we are seeing now) mean that older Bitcoins are generally being transferred - which could mean long-term holders are cashing out during a bull run.

In this analysis, we looked at the behavior of addresses that are long-term investors (i.e., have held Bitcoin for at least 155 days) to see if they actually sold some of their Bitcoin at this price and what this means for the market.

BTC supply is decreasing as long-term holders take profits

When the price of BTC was last below $10,000 (July 26, 2020), the amount of BTC in profit to long-term holders was 10.8 million. Since then, the price has almost doubled, but the supply of BTC in profit to long-term holders has only grown by 11.5% (0r $1.2 million) and currently stands at 12.1 million.

Despite continued price increases, long-term holders’ profit supply has stagnated ( Glassnode Studio )

Regarding book profits, the increase in profits due to the increase in the number of Bitcoins relative to the increase in the price of Bitcoin is not that significant, indicating that most long-term holders bought their Bitcoins at a level below $10,000 and have been hoarding Bitcoins for most of the recent bull market. However, the increase in ASOL in late November indicates that some long-term holders stopped hoarding during this period and began to cash out some of their profits.

Entity-adjusted ASOL reached a local peak on November 18, with more early Bitcoin sold ( Glassnode Studio )

The total number of long-term holders in profit peaked at 12.3 million BTC on November 17, when the price was around $17,670. Since then, the price of BTC has risen by about 9%, but the total supply of BTC in profit has decreased by about 200,000 BTC.

After the recent ASOL pump, long-term holders are seeing a shrinking supply of BTC in profits even as prices rise ( Glassnode Studio )

This supports ASOL’s indication that a significant amount of BTC owned by long-term holders was indeed sold around late November, and even though the price rose, the BTC supply decreased among long-term holders ’ profits.

Long-term holders selling: Is it bearish?

We have identified that some long-term holders have realized profits recently, but is this a bearish sign? No. In fact, as we outlined in our previous analysis, long-term holders have historically realized profits before and during bull markets.

Due to this trend, the total supply of BTC held by long-term holders typically declines before market peaks - and therefore, the amount of BTC supply that is part of the total profits of long-term holders also declines as a result.

Historically, total supply held by long-term holders usually decreases before bull runs ( Glassnode Studio )

The large drop in total supply held by long-term holders seen above makes intuitive sense; as these long-term holders realize profits, they make room for new retail investors to enter the market, which has historically driven Bitcoin’s biggest bull runs.

What does this mean for the market?

Long-term holders seem to habitually accumulate BTC during bear markets and then realize profits on the way up (but most importantly before the top) .

Previously, these periods of reduced long-term holder supply (and profit supply) lasted from weeks to months to nearly a year, making it difficult to predict how close we are to the next market top.

However, if the price of BTC follows this historical trend, it suggests we can expect further gains before reaching a top.