Long-Term and Short-Term Investors in Bitcoin Are Diverging: What Does This Mean?

• On-chain data indicates that the division between long-term and short-term Bitcoin holders has reached record levels in recent times.
• On the other hand, LTHs hold their assets without moving them even during volatile periods, earning them the popular nickname “diamond hands.”
• As LTH supply approaches the 15 million BTC limit and STH supply falls below the 2.5 million BTC level, the gap between these groups is at its widest level ever.

There seems to be a divergence between short-term and long-term investors in Bitcoin; how should this metric be interpreted?

Divergence Between Long and Short-Term Investors in Bitcoin

On-chain data indicates that the division between long-term and short-term Bitcoin holders has reached record levels in recent times. An analyst has noted that the gap between speculators and “HODLers” in the market has widened further in recent times.

“Short-term holders” (STHs) and “long-term holders” (LTHs) are the two fundamental groups into which the entire Bitcoin market can be divided. STHs represent all investors who purchased their coins less than 155 days ago, while LTHs include holders who have kept their tokens beyond this period.

Statistically, the longer an investor keeps their coins inactive, the less likely they are to sell them at any point. Therefore, STHs typically belong to the group with weaker conviction between the two.

LTHs, on the other hand, hold onto their assets without moving them even during volatile periods, earning them the popular nickname “diamond hands.” STHs, on the other hand, tend to sell quickly when negative sentiment (FUD) emerges in the industry or when a profitable selling opportunity arises.

Here is a chart showing the trend in the supply of these BTC investor groups:

The chart shows that Bitcoin LTH supply has increased in recent years, while STH supply has decreased recently. This indicates that the overall supply of the cryptocurrency is becoming increasingly inactive.

As LTH supply approaches the 15 million BTC limit and STH supply falls below the 2.5 million BTC level, the gap between these groups is at its widest level ever. The latest value of STH supply is at its lowest since the asset began in 2011. It appears that the number of short-term speculators in the market has reached record low levels.

The decline has impacted short-term investors

Last month, Bitcoin experienced a sharp drop from above $29,000 to below $26,000, and the asset did not recover. However, as seen from the chart, LTHs seem to be unfazed by the asset’s troubles as their supply continues to grow, while STHs have shrunk further.

The strength and continued growth of the LTH group may not affect the short-term market, but the fact that supply continues to be locked in the wallets of these HODLers for long periods could create a bullish effect due to how supply-demand dynamics work over extended periods.