Bitcoin (BTC) HODLer volume has marked previous tops and the beginning of bull cycles. With the dominant cryptocurrency moving towards $ 30,000, HODLer activity could be a useful tool to potentially measure BTC’s next spike.
Since October, as Cointelegraph reportedBitcoin’s HODLing activity has continuously increased. Fewer HODLers have moved their positions indicating overall bullish market sentiment.
Why HODLer Activity Is Important To Judge Sentiment In The Bitcoin Market
The term “HODLer” refers to old Bitcoin holders. It is possible to track the activity of HODLers by evaluating addresses that BTC have not moved in years.
If HODLers move their assets when Bitcoin’s price rises, it could indicate an intention to sell to make a profit on the rally.
Conversely, if HODLers move their assets when the Bitcoin price falls, it could mean doubling their investments.
So, based on Bitcoin’s price development, a spike in HODLer activity could indicate that a major price move is imminent.
For now, the HODLer volume suggests that a long-term Bitcoin pullback is unlikely to occur. Volume remains low compared to previous peaks, showing long-term holder confidence remains high.
However, HODLer volume may lag and start to rise as Bitcoin’s price falls in the short term. Then the possibility of an extensive correction could still arise.
As such, it would be important to observe HODLer volume in the near term, especially if Bitcoin is struggling to climb above USD 30,000.
The technical momentum has pushed up the price of Bitcoin in recent months. But if that slows down, HODLers may proceed to sell, pending a correction by the sheer number of investors sitting on unrealized gains.
BTC getting scarcer is a variable
Until HODLer volume spikes to past highs, it would be premature to predict a significant drop-off anytime soon.
Several macro factors, such as the declining dollar and the decline in Bitcoin’s liquidity, have made BTC more attractive as a store of value, especially for institutions.
Cointelegraph earlier reported that Bitcoin is becoming less liquid due to increasing HOLDer activity.
This means that less BTC can be bought or sold, making BTC more scarce as it enters 2021.
Rafael Schultze-Kraft, Glassnode’s CTO, emphasized that this is bullish for Bitcoin in the longer term. He said:
“One of the most important #Bitcoin charts in 2020. Liquidity is squashed, investors hoard, accessible BTC is getting scarcer. 1M BTC has become illiquid this year ie owned by entities issuing <25% of the coins they receive. Less $ BTC you can buy. Bullish. "