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27 September 2022
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Bitcoin Capitulation Over? Short-Term Holders Bought 330K BTC Since Terra Collapse

Glassnode suggested that the capitulation event in the crypto market has taken place already as short-term holders keep buying.

For the first time in over two years, short-term holders (STH) have become more active in the BTC marketplace than long-term holders (LTH), said Glassnode.

The company’s latest market report argued that this could suggest the capitulation event in the crypto space has already taken place.

STHs Added 300K BTC Since Luna Collapse

The Terra ecosystem imploded in early May when the native algorithmic stablecoin UST lost its dollar parity. Opportunist traders took advantage of the way the stablecoin was structured and linked to LUNA, which ultimately resulted in both assets’ prices plummeting to mere cents.

Aside from resulting in over $60 billion gone from the market caps of LUNA and UST, this collapse had a serious effect on the entire crypto industry. The entire market began crashing, resulting in BTC dumping by more than $10,000 in days to yearly lows.

Such extreme volatility, especially when riskier assets decline in value, exposes the nature of investors. Typically, those with higher conviction (regarded as long-term holders or investors who have gone through bear markets in the past as well) tend to stick around, while short-term holders rush to dispose of their assets, very often at a loss.

While this seemed accurate for some such investors, Glassnode’s latest report showed that others had shown a different attitude. Ever since the adverse developments in early May, STH supply increased by more than 330,000 BTC.

This usually happens only during bull markets, as STH buy at tops and sell at bottoms. There have been only a handful of examples where they were accumulating during price retracements, the latest of which was during the COVID-19 crash in March 2020.

Bitcoin STH Positions. Source: Glassnode
Bitcoin STH Positions. Source: Glassnode

BTC in Distribution or Accumulation Phase?

Glassnode explained that bitcoin usually finds itself in distribution or accumulation cycles. The former is a bull market characteristic as investors are incentivized to realize gains, while the latter typically happens in bear markets.

As of now, the metric showing the current sentiment – the Supply Active 1+ Years – is just under the previous ATH marked in May this year at 65%. According to the analytics firm, “this highlights the significant conviction of May-July 2021 buyers after the great miner migration,” which could be considered a “constructive mechanic within a bear market.”

Bitcoin Supply Active 1+ Years Ago. Source: Glassnode
Bitcoin Supply Active 1+ Years Ago. Source: Glassnode
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