In the past six months, the Bitcoin network has seen a significant drop in capital inflows, with the Bitcoin (BTC) price stuck in a “lengthy consolidation phase,” according to Glassnode.
This extended period of consolidation, which has persisted since after the 2024 Bitcoin halving, has seen the short-term holder (STH) cohort, those who have held BTC for less than 155 days, market gradient turn negative while the realized price gradient remained positive but trending lower.
“This indicates that downside in the spot price was more aggressive than the intensity of capital outflows,” Glassnode analysts said in a Sept. 25 report.
Bitcoin 155-day market and realized delta gradient. Source: Glassnode
Such a long consolidation has not been seen since the 2019-2020 period, a time that was preceded by a strong rally in Q2 2019.
A deeper analysis of this price stagnation reveals that STHs, particularly those who have held Bitcoin for between one week and three months, are playing a significant role.
Analyzing the market value realized value (MVRV) ratio of STH sub-cohorts, Glassnode analysts revealed that new investors have been under financial pressure since June 2024, bearing increasingly larger unrealized losses. However, this pressure was marginally less than that experienced during the March 2020 Covid crash.
“Despite many new investors being underwater on their holdings, the magnitude of their unrealized losses are notably less severe than the mid-2021 sell-off and the March 2020 COVID-19 crash.”Bitcoin MVRV ratio by Age. Source: Glassnod
The report further notes that when the market enters a prolonged regime of contraction, the cost basis of younger investors pulls the spot price lower, which can be “characterized as a net capital outflow from the Bitcoin ecosystem.”
The report explained that the cost basis of investors who have held Bitcoin for between one week and one month (1w-1m), often categorized as the “fast trace,” has slipped below that of the one month to three months (1m-3m) cohort, often referred to as the “slow trace,” suggesting the market is experiencing a net outflow regime.
According to Glassnode, this indicator revealed that “a sustainable market reversal may be in its early stages of developing positive momentum.”
Bitcoin capital flows by STH sub-cohorts. Source: Glassnode
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However, despite experiencing a local period of price consolidation and net capital outflow, Glassnode analysts say that the confidence of new investors in the market remains “remarkably robust.”
To assess how STHs react to sudden market shifts, the market intelligence firm analyzed the difference between the cost basis of new investors who are spending (orange line in the chart below) and the cost basis of all new investors (blue line).
They found that the magnitude of losses locked in by STHs following high unrealized loss conditions witnessed over the recent months was relatively low compared to the cost basis of their holdings. As such, they did not overreact by realizing their losses, showing “comparatively higher confidence in the market than previous ‘bearish trends’.”
Bitcoin STH investor confidence in trend. Source: Glassnode
Continuing, Glassnode notes that Bitcoin’s recent recovery has seen it remain above the STH cost basis of $63,900, driving optimism for further upside.
“This rally could achieve technical significance if the price also holds above the 200-day moving average at $63.9k.”This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.