The Bitcoin market experienced a shockingly dramatic weekend, unlike the typical silent price action seen in previous weekends. On Saturday, January 31, the world’s leading cryptocurrency seemingly drove other crypto assets south of the charts, with its price plummeting from $84,350 to just $75,000 in one fell swoop.

As the situation developed, an inversely correlated change also appeared under the charts. A recent on-chain evaluation found that the behavior of long-term holders of Bitcoin is changing, unlike what its short-term holders are doing.

Long-term holders accumulate as short-term supply declines

A pseudonymous Darkfost web analyst recently contacted CryptoQuant via: Quick postindicating that long-term Bitcoin holders are accumulating more BTC. The relevant indicator here is the change in LTH supply (Coinbase correction).

For context, this metric tracks the net change in the amount of Bitcoin held by long-term holders (typically, coins remain unchanged for ~155 days). According to the analyst, approximately 186,000 (monthly average) were added to the supply of long-term holders.

Seeing that more and more coins are aging beyond 155 days, Darkfost suggested that in turn the supply of short-term holders is steadily decreasing. It is worth noting that the analyst indicated that this type of transition (between long-term and short-term investors) last occurred in April, when the price of Bitcoin dropped.

As is intuitively obvious, rising LTH supply is typically interpreted as growing confidence among long-term Bitcoin investors. Consequently, this means that long-term holders distribute less of their assets and save more.

Theoretically, this behavior is bullish news for the cryptocurrency. This is because as LTH consumes supply, the amount of Bitcoin available for sale decreases. Historically, this is also a bullish signal for the BTC price, as it has often appeared in the early phases of accumulation periods or in the tardy phases of corrections.

However, the broader market implications in the current context may not be so favorable. Darkfost emphasized that there is very tender demand that could mitigate the falling BTC price.

At the same time, the Bitcoin market appears to be entering a bear phase; therefore, it cannot be ruled out that stern capitulation events will occur in the near future. If this happens, Bitcoin’s price will likely plummet as weaker investors may sell their holdings out of fear or as victims of liquidation events.

For the confident outlook to be truly meaningful, there must be a clear recovery in demand accompanied by continued accumulation of long-term holders.

Bitcoin price at a glance

At press time, Bitcoin is trading at around $78,060, reflecting a 6.9% loss over the past day.

Featured image from iStock, chart from TradingView