Introduction
Understanding investor behavior in the Bitcoin market requires distinguishing between Long-Term Holders (LTHs)—typically investors with low time preference—and Short-Term Holders (STHs)—traders capitalizing on price volatility. This analysis introduces a refined methodology to classify Bitcoin supply held by these groups and examines their profit/loss states to reveal market trends.
Classifying LTH and STH Supply
Key Threshold: 155 Days
Research indicates 155 days as the critical threshold where the probability of a UTXO being spent flattens, distinguishing LTHs from STHs.
Methodology Refinement
- Entity-Based Analysis: Evaluates Bitcoin entities (wallets) based on average holding duration.
Smooth Transition: Replaces a sharp 155-day cutoff with a logistic function (midpoint: 155 days, transition width: 10 days).
- At 155 days: 50% attribution to LTH/STH.
- At ~177 days: 90% attributed to LTH.
Note: Exchange-held BTC is excluded to reflect true holder behavior.
Long-Term Holder (LTH) Supply Trends
Current Status
- 12.3M BTC (66% of circulating supply) held by LTHs.
- Pattern: Declines during bull markets as investors take profits.
Key Metrics
- LTH Net Position Change: Monthly shifts highlight accumulation in bear markets and sell-offs in bull runs. Recent downtrend suggests early bull market activity.
- Profit/Loss State: 97% of LTH supply (12M BTC) is currently profitable.
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Short-Term Holder (STH) Supply Trends
Current Status
- 3.7M BTC (20% of supply) held by STHs.
- Pattern: Rises during price rallies as older coins reactivate for trading.
Profit/Loss State
- 97% of STH supply (3.5M BTC) is in profit.
Comparative Analysis: LTH vs. STH Profitability
Relative Supply in Profit/Loss
- Bull Markets: Nearly all LTH supply profits.
- Bear Markets: LTH supply enters loss zones (e.g., "Black Thursday" 2020).
- Valleys of Loss: Periodic dips (e.g., 2018) show new investors entering LTH status at a loss, later recovering.
Improvement Over Traditional Metrics
- New LTH Net Position Change: Unbounded, clearer signals vs. capped "Hodler Net Position Change" (based on Liveliness metric).
FAQs
1. Why is 155 days the LTH/STH threshold?
Research shows UTXOs older than 155 days are significantly less likely to be spent, marking a behavioral shift.
2. How does excluding exchange supply improve accuracy?
Exchange-held BTC often reflects trading activity, not true holding behavior.
3. What does declining LTH supply indicate?
Profit-taking during price rallies, signaling bullish phases.
4. How reliable are these metrics for predicting market cycles?
Historical trends align with bull/bear transitions but should complement broader analysis.
5. Can STH supply predict price tops?
Rapid STH supply growth often precedes market peaks as traders dominate.
6. What’s the significance of the "valley of loss"?
Shows periods where LTHs absorb losses, later recovering—key for sentiment analysis.
Conclusion
This framework quantifies Bitcoin investor behavior through:
- Supply Distribution: Tracks LTH/STH holdings.
- Profit/Loss States: Indicates market sentiment.
- Cycle Trends: Validates bull/bear transitions.
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Disclaimer: This analysis does not constitute investment advice. Conduct independent research before making decisions.
### Keywords:
- Bitcoin supply
- Long-Term Holders
- Short-Term Holders
- Profit/Loss analysis
- On-chain metrics
- Market cycles
- Investor behavior
- HODL
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