Bitcoin HODLer volume suggests a prolonged correction is not likely, but that could change.
Bitcoin (BTC) HODLer volume has marked previous tops and the start of bull cycles. As the dominant cryptocurrency heads towards $30,000, HODLer activity could be a useful tool to potentially gauge BTC’s next peak.
Since October, as Cointelegraph reported, the HODLing activity of Bitcoin has continuously increased. Fewer HODLers have been moving their holdings, which indicates an overall bullish market sentiment.
Why HODLer activity is important to assess Bitcoin market sentiment
The term “HODLer” refers to long-time holders of Bitcoin. It is possible to track the activity of HODLers by evaluating addresses that have not moved BTC for several years.
If HODLers move their assets when the price of Bitcoin is going up, it might indicate an intent to sell to take a profit on the rally.
Conversely, if HODLers move their assets when the Bitcoin price declines, it could mean they are doubling down on their investments.
Hence, based on the price trend of Bitcoin, a spike in HODLer activity could signal that a major price movement is imminent.
For now, HODLer volume suggests that a prolonged Bitcoin pullback is not likely to happen. The volume remains low in comparison to previous peaks, which shows that the confidence of long-time holders remains high.
However, HODLer volume could lag behind and begin to spike as the price of Bitcoin slumps in the near term. If so, the possibility of an extended correction could still emerge.
As such, it would be important to observe the HODLer volume in the near term, especially if Bitcoin struggles to rise above $30,000.
The technical momentum has been driving up the price of Bitcoin in recent months. But if that slows down, HODLers could move to sell, anticipating a correction to occur from the large number of investors sitting on unrealized gains.
BTC becoming scarcer is a variable
Until the HODLer volume spikes to previous highs, it would be premature to predict a sizable pullback in the short term.
Various macro factors, such as the declining dollar and the drop of Bitcoin liquidity, have made BTC more attractive as a store of value, particularly for institutions.
Cointelegraph previously reported that Bitcoin is becoming less liquid due to increasing HOLDer activity.
This means that there are fewer BTC that could be bought or sold, which makes BTC more scarce as it heads into 2021.
Rafael Schultze-Kraft, the CTO of Glassnode, emphasized that this is bullish for Bitcoin in the longer-term. He said:
“One of the most important #Bitcoin charts in 2020. Liquidity getting squashed, investors hoarding, accessible BTC becoming scarcer. 1M BTC have become illiquid this year, i.e. are held by entities that spend < 25% of coins they receive. Less $BTC for you to buy. Bullish.”
Source: , CoinTelegraph
Articles listed with Cash Tech News as the author are either general information, or may have been imported from another website, to bring our readers a rich media experience that encompasses articles that we find interesting, as well as those curated by others.
The views and opinions expressed here are for informational purposes only, and should not be confused with professional financial advice. These opinions are solely those of the author and do not necessarily reflect the views of CashTechNews.com. Every investment and trade involves risk. You should conduct your own research, and contact your professional financial advisor before making any investment.
Corrections, feedback, and ideas should be submitted through the website contact form.