Outgoing flows from exchanges exceed 36,000 BTC per month, says Glassnode.
Long-term holders control 75% of the bitcoin supply.
The analytical firm Glassnode considers that the behavior of the so-called on-chain entities, and the retention of bitcoin (BTC) by long-term holders, are two of the main factors that can drive a probable rebound in price. The analysis of these metrics, together with other indicators of the Bitcoin network, is part of the report Week On-chain # 29, published this Monday, July 19,
Glassnode defines an entity as a unique group of associated addresses. “If a group of addresses interacts and shows heuristic signs suggesting a single owner, those addresses are classified as a single entity,” the report states.
In the chart below, Glassnode presents three metrics that, in his view, provide a comprehensive picture of on-chain entities.
The first are the shipping entities (green) associated with the destruction of UTXO. Most wallets enforce single-use addresses when spending, which typically lowers the entity count, the report says. “Currently, we see fewer spending entities that indicate lower UTXO spending and a preference for HODLing,” the study concludes.
The recipient entities (pink) are the opposite. This means there are new owners and new build-up, the authors claim. In June and July there has been strong growth in the receiving entities, according to the report.
The net growth of entities (blue), lastly, take the difference between ‘destroyed’ and ‘created’ entities. Since “entities destroyed” are decreasing and “entities created” are increasing, we have “positive aggregate net growth.” In summary, there is more HODLing and less expenses, which likely reflects a build-up-like environment.
Net variation of on-chain entities. Source: Glassnode.
The study supports this observation of the net growth of entities, showing the change of the net flows of bitcoin in the exchanges, “that has reverted to outgoing flows of BTC, after a significant period of inflows. Exchanges are currently registering net outflows of 36,300 BTC per month, ”the report concludes.
Inbound flows of BTC to exchanges have reversed, says Glassnode. Source: Glassnode.
The miners, on the other hand, are demonstrating extreme resilience and a desire to accumulate, according to the report, despite the large expenses motivated by the so-called “great migration”. This expression refers to the transfer of miners from China to other latitudes, due to government restrictions, as reported by CriptoNoticias. “It is possible that the additional selling pressure of the miners that have been disconnected, has been overcome by the extraordinary profitability of the miners that remain operational,” the study states.
Miners begin to accumulate again (green bars). Source: Glassnode.
Long-term bitcoin holders profit and loss
Starting from the volume of the BTC supply in the hands of long-term holders (LTH), also classified as ‘strong hands’, it can be seen that HODLing seems to be the preferred strategy, says the report. “Long-term holders currently own 75% of the current supply. 6% of these funds have losses and 69% are still with profits ”, say the authors.
6% of the supply in the hands of long-term holders is currently in loss. Source: Glassnode.
The authors state that the upward pressure that began in the bull markets historically, has been caused by LTH that owned 65% (2013), 75% (2017) and 80% (2020) of the circulating supply, in the respective cycles.
Changes in the illiquid supply of bitcoin
The growth of supply in the hands of LTHs is consistent with the change suffered by illiquid supply, according to the study. In May, the intensive sale of BTC began, as shown by the area in red, to decrease for much of June. Then, as the area in green shows, an accumulation period begins, with little expense.
After the intensive sales of May (red), the accumulation is reset (green). Source: Glassnode
The highs in the green areas reveal the increase in retention, while the lows occur when illiquid currencies return to circulation, that is, to liquidity, says Glassnode.
HODL waves of effective capitalization
Glassnode uses effective cap HODL waves “to round out the bullish case for Bitcoin,” as they show unmistakable indicators of currency retention and maturity, the study says. “They show more evidence of the likelihood of a possible supply reduction,” say the authors.
HODL waves of effective capitalization are, according to Glassnode, another bullish indicator of the price of bitcoin.
The study highlights on the one hand that, for several months, the younger bands of coins (red-orange) have been reduced, since they constitute a smaller proportion of the «realized value». This occurs when young coins mature and age to become older coins, which creates an enlargement of the oldest coin bands (yellow, 3m-12m) in the hands of the LTHs.
Glassnode has not only presented bullish indicators. In the first part of this report, published by CriptoNoticias last Tuesday, July 20, Glassnode addresses the bearish metrics that could affect the price of bitcoin.