The volume of Bitcoin (BTC) HODLer marked the previous tops and the beginning of bullish cycles. As the dominant cryptocurrency reaches $ 30,000, HODLer activity can be a useful tool for potentially measuring the next BTC peak.
Since October, as Cointelegraph reported, Bitcoin’s HODLing activity has been steadily increasing. Few HODLers have changed their positions, which indicates a general bullish sentiment in the market.
Why HODLer activity is important to assess Bitcoin market sentiment
The term “HODLer” refers to long-time Bitcoin holders. It is possible to track the activity of HODLers by evaluating addresses that have not changed BTC for several years.
If HODLers move their assets when the price of Bitcoin is rising, it could indicate an intention to sell for a profit on the rise.
On the other hand, if HODLers move their assets when the price of Bitcoin falls, it could mean that they are doubling their investments.
Therefore, based on the Bitcoin price trend, a spike in HODLer activity may signal that a major price movement is imminent.
For now, the volume of the HODLer suggests that a prolonged Bitcoin withdrawal is unlikely to occur. The volume remains low compared to previous peaks, which shows that the confidence of longtime holders remains high.
However, the volume of HODLer may lag behind and start to rise as the price of Bitcoin plummets in the short term. In that case, the possibility of an extended correction may still arise.
As such, it would be important to look at the volume of HODLer in the short term, especially if Bitcoin struggles to rise above $ 30,000.
The technical momentum has been raising the price of Bitcoin in recent months. But if that slows down, HODLers may move to sell, anticipating a correction to occur due to the large number of investors sitting on unrealized gains.
BTC becoming scarcer is a variable
Until the volume of the HODLer reaches the previous highs, it would be premature to predict a considerable setback in the short term.
Several macro factors, such as the falling dollar and falling Bitcoin liquidity, have made BTC more attractive as a store of value, especially for institutions.
Cointelegraph previously reported that Bitcoin is becoming less liquid due to increased HOLDer activity.
This means that there is less BTC that could be bought or sold, which makes BTC scarcer in 2021.
Rafael Schultze-Kraft, CTO of Glassnode, emphasized that this is optimistic for Bitcoin in the long run. He said:
“One of the most important #Bitcoin charts in 2020. Liquidity being crushed, investors piling up, affordable BTC getting scarcer. 1M BTC have become illiquid this year, meaning they are held by entities that spend <25% of the coins they receive. Less $ BTC for you to buy. Optimistic."