Large amounts of long-term Bitcoin are moving: What does it signal for the market?

With Bitcoin trading in a consolidation zone from $117,000 to $120,000, long term holder (LTH) has started distribution. This means that the "dormant" Bitcoins are gradually returning to the market.

This could be a negative signal for BTC.

The distribution amount from long-term holders increases significantly

According to analysis by Axel Adler from CryptoQuant, on July 24, Bitcoin recorded an unusual monthly CDD/annual CDD ratio of 0.25. This ratio was recorded in the price zone from $104,000 to $118,000.

CDD – Coin Days Destroyed – is a metric that measures the amount of long-term Bitcoin that has been "destroyed" from its inactive state when it is traded again. A high CDD rate indicates that holders are starting to move or sell their coins.

CDD month/year of Bitcoin | Source: CryptoQuantIt is noteworthy that the current CDD levels are particularly important, as they correspond to historical peaks in 2014 and the correction phase of 2019.

Specifically, in 2014, after reaching a peak of 1,000 dollars, Bitcoin fell by up to 95%, down to 111 dollars after the Mt. Gox scandal. In 2019, BTC surged to 8,000 dollars, but then corrected by 40% after China banned crypto trading.

In that context, the recent sharp increase in the monthly/yearly CDD rate shows that holders are collectively bringing BTC back to the market. Such spikes in CDD are often indicative of active distribution by experienced investors.

Change in net position of Bitcoin holders | Source: CheckonchainThe Change in net position index of holders further reinforces evidence of this increasing distribution trend. According to data from Checkonchain, this index has remained in the negative zone throughout the past week, recording a low of -134,700 BTC.

The supply of STH and LTH | Source: CheckonchainAt the same time, the amount of Bitcoin supply held by LTH has decreased from 14.12 million to 13.88 million, equivalent to a decrease of 240,000 BTC.

Such sharp declines indicate that when the price of Bitcoin rises, long term investors have shifted to distribution (to sell ).

Historically, an increase in distribution from holders usually precedes price corrections, due to selling pressure weighing down the market. Therefore, if the distribution trend continues, the current price increase may face the risk of weakening.

Institutional demand remains high

Interestingly, although long term holders are selling, the demand from institutional investors for Bitcoin remains high. When considering the inflows into spot ETFs, the total net inflow is still positive, except for GBTC.

The total net inflow of Bitcoin ETF spot | Source: CoinGlassThus, IBIT leads with a market cap of $57.15 billion, followed by FBTC with $12.33 billion. This is a clear sign of accumulation activity from institutional investors.

Will this hinder the rise of Bitcoin?

According to the analysis, Bitcoin is under significant pressure from LTH increasing distribution. As a result, the king of coin is still stuck in a price zone, unable to reclaim the all-time high (ATH) of 123,000 dollars. However, demand from treasury funds and inflows into Bitcoin ETFs remains high.

Therefore, this demand is creating strong support by absorbing the selling pressure that arises. In the current situation, such distribution is unlikely to stop the upward momentum, but only to gently slow down the growth rate.

However, if the distribution from LTH decreases, BTC will be strong enough to retest ATH and aim for new highs.

On the contrary, if the current distribution trend continues, Bitcoin will continue to maintain a consolidation state in the price range from 115,000 to 120,000 dollars.

Minh Anh