Bitcoin Holders Halt Sales: Is the Rally Real?

There's a unique breed of Bitcoin holder who emerges when market noise reaches a fever pitch. These are the individuals who weathered the storm of 2021’s decline into 2022, steadfastly holding onto their keys, and accepting the possibility of a steeper price drop than their emotional state could handle. When prices surge, they’re hailed as visionaries. But when the market turns, they’re quickly labeled as villains. Recently, the “villain” narrative has dominated headlines, with claims of long-term holders dumping their coins and signaling the end of the cycle. This story offers a neat explanation for a complex market, but the blockchain often resists such simplistic interpretations, especially when large custodians are moving funds.

Decoding Long-Term Holder Behavior

On-chain analysts, like Darkfrost, have been closely monitoring the “LTH supply change” – a metric tracking the movement of coins held for months. Their analysis suggests the selling pressure is easing, a trend corroborated by the first small green candle observed since mid-July. CryptoQuant founder Ki Young Ju also highlighted the diminishing sell-off from long-term holders on X (formerly Twitter). But can we truly rely on these signals?

The Coinbase Shuffle and On-Chain Misinterpretations

The data was temporarily skewed by a significant internal transfer of crypto within Coinbase in late November. Coinbase clarified that these transfers were pre-scheduled, unrelated to any security breach, and part of a routine security upgrade – rotating legacy wallets to new ones. Critically, this movement had no impact on customer deposits or product functionality.

However, internal wallet migrations can mimic genuine selling activity on the blockchain. Coins move, their age resets, and dashboards light up, leading to potentially incorrect conclusions. This is movement without a change in ownership. Therefore, when analysts attempt to “fix” long-term holder data by isolating the Coinbase effect, they’re essentially removing a large operational footprint from the charts.

What is the Long-Term Holder Signal Saying Now?

Analyzing adjusted charts reveals a subtle but important shift: long-term holders appear to be reducing their selling activity. This aligns with the broader market sentiment suggesting a potential bottom is forming, though confirmation remains tentative.

Even Glassnode, employing an entity-adjusted cohort model with a ~155-day threshold for defining long-term holders, described them as “heavy net distributors” of approximately 104K BTC per month in late October, as detailed in their Week On-Chain report, “Lacking Conviction.” This report also emphasizes a crucial point often overlooked during market downturns: major Bitcoin expansions historically begin after long-term holders transition from distribution to sustained accumulation – a regime change that requires time to validate.

Glassnode’s methodology is key. Their documentation explains the LTH/STH split centers around 155 days, and the metric suite is entity-adjusted, not a simple address count. Therefore, the current “LTH stopped selling” narrative should be interpreted as an early indication, not a definitive victory.

The ETF Factor: A New Dynamic

A second, significant factor now influences Bitcoin’s behavior: the emergence of Exchange Traded Funds (ETFs). ETFs have transformed Bitcoin into a daily barometer of risk appetite. A single large ETF day can easily overshadow even a noticeable shift in long-term holder behavior. For example, BlackRock’s iShares Bitcoin Trust (IBIT) experienced a one-day outflow of roughly $523 million in November.

These ETF flows aren’t the same as long-term holders selling, but they impact the same market, at the same time, within the same order book. This is why Bitcoin can appear calm on-chain while simultaneously trading like a volatile tech stock.

The Macroeconomic Landscape

The macroeconomic environment is evolving, but it’s not yet “easy mode” for Bitcoin. Historically, Bitcoin’s largest rallies occur when liquidity is increasing and investors feel comfortable taking risks. This is why the Federal Reserve remains a central topic in crypto conversations.

In December, the Fed cut its target range by 25 basis points to 3.5% to 3.75%. Simultaneously, the New York Fed announced the purchase of Treasury bills under its reserve management program, totaling approximately $40 billion, starting December 12th.

These actions, while seemingly positive, are more about plumbing and maintaining market stability than direct stimulus. They help explain why risk markets can stabilize even with bruised sentiment, and the next few months will depend on whether buyers consistently re-enter the market.

Three Potential Scenarios

Here are three possible paths forward, and the conditions that would confirm each one:

• A Real Reset and Recovery: Long-term holder selling continues to fade, remaining subdued for weeks. ETF flows stabilize and turn mixed to positive. Volatility cools. In this scenario, Bitcoin often exhibits its characteristic pattern: boring people first, then moving.
• A Wide, Frustrating Range: Long-term holders reduce selling but don’t accumulate significantly. ETFs remain choppy, and macroeconomic headlines continue to sway market sentiment. This outcome would involve more time rebuilding confidence than achieving new highs.
• Distribution Returns and Patience is Tested: If long-term holder distribution resumes, and ETFs experience another period of heavy outflows, the price could remain under pressure. Glassnode’s Week On-Chain view highlights key cost basis levels and how overhead supply can cap rallies when conviction is low.

The Human Element

For those who have navigated multiple market cycles, the most significant change isn’t a single-day candle. It’s the moment the urge to sell diminishes, replaced by a willingness to wait. If long-term holders are genuinely stepping back from distribution, the market becomes less fragile. This doesn’t guarantee higher prices, protect against macroeconomic shocks, or negate the influence of ETF flows.

It does something more subtle. It alters who is willing to be the marginal seller, and in Bitcoin, that often dictates the beginning of the next chapter.

Mentioned in this article:

Bitcoin Glassnode CryptoQuant Coinbase BlackRock