According to the latest data, Bitcoin’s halving process has been completed by 85%. Additionally, the supply held by long-term holders (LTH) is nearing an all-time high (ATH). In previous cycles, this has been a signal of an impending macro bottom followed by the early stages of a new cycle.
The indicator of Bitcoin’s supply in the hands of long-term holders has historically been a good measure of the cryptocurrency market’s health. Typically, this metric has an inverse correlation with the long-term price action of the largest cryptocurrency.
Long-term holders (HODL) their assets and do not move them during market downturns. Moreover, the largest increases in the supply held by LTH occur during severe price downturns (the red arrows). This is when strong-handed investors, seeing Bitcoin’s price plummet, refuse to sell. They hold onto their assets because they believe the cryptocurrency market will recover in the future, yielding profits.
Conversely, the opposite holds true during a bull market. As Bitcoin’s price surges, LTH become increasingly willing to sell their holdings. In history, during every major bull market, we have witnessed a significant decrease in the supply held by LTH. Naturally, the coins then move into the hands of short-term holders (STH), those who enter the market in the later stages, driven by the desire for quick profits.
A cryptocurrency analyst known as @therationalroot has published a chart showing Bitcoin’s supply held by long-term holders on Twitter. He has also overlaid each Bitcoin halving onto his chart. In his chart, we first observe that currently, the percentage of the Bitcoin supply held by LTH is approaching its ATH at around 76%. This was established back in late 2015 as Bitcoin’s price concluded the accumulation phase before the second halving event.
Following that, we see that in each instance, the indicator reached its peak of a certain cycle a few months before the Bitcoin halving event (green circles) took place. Afterward, post this local peak, the supply held by LTH gradually decreases and remains relatively stable for a few months following the subsequent halving event. It is only around six months after this event that this metric undergoes a significant drop, signaling the start of a cryptocurrency bull market.
The analyst also posted another chart depicting the progression of Bitcoin’s halving percentage. It compares the time between the historical halvings of the last three cycles. According to @therationalroot, the current Bitcoin halving has completed 85%. Furthermore, the relatively small 15% ending cycle is characterized by Bitcoin’s price action remaining flat. In both cases—2016 and 2020— the price of the largest cryptocurrency stayed remarkably similar.
The difference is that in the two previous cycles, Bitcoin experienced sideways consolidation with a bullish bias. On the other hand, in the previous cycle, the Black Swan event caused by the Covid-19 pandemic provided investors with an opportunity. They could gain an attractive position just before the planned halving.
If history repeats itself, in the grand scheme of things, the cryptocurrency market might face an extended sideways trend lasting about a year. The upcoming Bitcoin halving event, expected to occur in mid-April 2024, may not have an immediate impact on Bitcoin’s price. Its effects may only become apparent in the last quarter of 2024 and throughout 2025.
This prediction aligns with the trends seen on the Bitcoin supply chart held by long-term holders. The indicator is currently approaching ATH. It will also need approximately 12 months to reverse the trend and transition into a distribution phase. When long-term holders start selling after a Bitcoin halving, it will be one of the first signals of the beginning of a cryptocurrency price uptrend.