Bitcoin's HODL Wave: What Investors Can Learn From The 70% Untouched Supply

Bitcoin is entering a critical phase, marked by an intriguing trend: 70% of its supply has remained untouched for over six months, signaling a strong HODLing pattern, according to Glassnode. This behavior suggests that many investors are confident in a future price increase and choose to hold onto their assets. But does this wave of HODLing reflect the market's underlying dynamics, or is there more beneath the surface?

International and regional economies seriously impact Bitcoin's dynamics and investors' decision-making. Knowing the emotion behind the holder is crucial. Today, it's hard to say if the holders are showing confidence by not selling or simply biding their time and planning to sell when the moment is right.

The Economic Factors: Why is Bitcoin Dipping?

Before getting into the HODL pattern of Bitcoin and projecting its future trend, it's important to discuss why the prices have been hovering between the $55,000 to $70,000 zone since July. Bitcoin has approached its all-time high and created a breakout pattern several times over the last few months. Yet, it has continuously seen corrections around the $70,000 zone. There are a lot of global economic factors that have been contributing to this trend.

Recently, in Japan, the yen – known for its status as an anti-risk currency – has outperformed other major currencies, including the US dollar. The appreciation of the yen has triggered the unwinding of carry trades, where investors had borrowed yen to finance riskier investments, including cryptocurrencies. As borrowing it became more expensive, many investors began closing these positions, leading to a sell-off in Bitcoin. This contributed to Bitcoin's decline from approximately $70,000 to the $50,000 zone in the past month.

There was also a brief period of panic in the market after the German government sold nearly $2 billion worth of Bitcoin in early July. This large chunk of BTC was seized by the German police from a movie piracy website earlier this year. Although the sales were part of a legal process, their timing aggravated fears among investors, leading to further price declines.

HODL Wave and Current Investor Behavior

While these economic factors have impacted Bitcoin's price in recent months, the token's long-term holders (LTHs) have remained largely unphased. In fact, 16.7% of all BTC in existence haven't changed hands in a decade. More importantly, 44% of all Bitcoin has not been transferred out of wallets in over six months.

The reluctance to sell, even during substantial price corrections, reflects a deep-seated belief in Bitcoin's long-term value proposition – which isn't something you often see in other tokens. Glassnode's analysis indicates that many LTHs had already distributed their coins leading up to Bitcoin's peak in March after the SEC's ETF approvals. These holders have largely refrained from further selling, even as prices dipped.

So, what does this mean for Bitcoin's long-term price? To understand this, we need to first discuss the concept of the HODL wave. A HODL wave visually represents the behavior of Bitcoin investors during market cycles. It starts forming after a price rally when a large volume of Bitcoins is transacted, creating a surge in "young" Bitcoins (those recently involved in transactions). As time passes, these Bitcoins "age" and move into older age groups, reflecting a holding pattern among investors.

The longer a wave persists, the stronger the holding sentiment. A break in the wave, with significant movement of older Bitcoins, might signal a shift in sentiment and potential selling pressure. However, currently, there does not appear to be any break in the HODL wave. It's actually the opposite. According to Glassnode's recent data, Bitcoin holders appear to be rotating back towards HODLing and accumulation.

If we look at the accumulation trend or Bitcoin's buying behaviour, larger wallets that already own substantial amounts of Bitcoin have started to accumulate more BTC since August. This sort of accumulation indicates a strong belief that the token will turn bullish. The economic and geopolitical factors that influenced the dip in July and August seem to have cooled down. Some people are still selling, but the overall trend is shifting towards holding. Bitcoin's year-to-year growth is still significant, sitting at around 138% as of October 2024, which is higher than any other assets or centralized currency in the market right now.

Overall, the current accumulation trend and extending HODL wave suggest that Bitcoin holders are confident in its future, and we might see new highs for the largest token.

Sailing These Choppy Waters: How Can Investors Overcome Hurdles?

While the HODL wave data suggests that investors are not inclined to sell in the near future, the unpredictable nature of global economic events poses a major challenge. We've seen this throughout the year — key geopolitical and regulatory shifts can change market sentiment in seconds. With the US election coming up, interest rates changing, and more regulations being introduced across EMEA, external factors will continue to play a large role in Bitcoin's market sentiment.

Also, the psychology of holding Bitcoin long-term can create a false sense of security. Investors may assume that their strategy of holding will always yield positive returns, which can lead to complacency. So, a clever strategy would be to take precautions and diversify your portfolio. In any case, investors should not rely on a single asset class and try to include diverse assets in their portfolio, like stocks, bonds, and even other tokens.

It's really important to clearly define an entry and exit point. Bitcoin might be the perfect asset for HODL, but an investor should also have a predetermined price level to liquidate. This level should be determined based on their risk tolerance and market analysis. This approach helps avoid emotional decision-making during market turbulence and ensures that profits are secured or losses minimized at predetermined thresholds.

Another crucial measure is to set up a stop-loss function. Almost every major exchange now allows investors to implement a stop-loss order, which automatically sells a position when it reaches a certain price.

Bottom Line

The HODL wave and Bitcoin's market dynamics suggest strong investor confidence and belief in the token's long-term potential. Despite short-term corrections and external economic pressures, the HODL trend suggests that many investors expect higher prices in the future. Yet, the current global economic and geopolitical environment is as volatile as the crypto market. Given the shifting nature of market sentiment, it's important for investors to remain attentive and consider adopting thoughtful, proactive strategies.

Created by Gracy Chen

Gracy Chen, CEO of Bitget ( formerly the Managing Director), oversees the growth and expansion of global markets, strategy, execution, business and corporate development of Bitget. She started her journey to the crypto world in 2014, being an investor in the early days of BitKeep (now Bitget Wallet), Asia's leading decentralized wallet. Gracy was named a Global Shaper by the World Economic Forum in 2015.

Moreover, Gracy has been selected as delegate to attend the recent UN Women CSW68 conference , an event where the UN member states representative and social organizations get together to raise and discuss critical issues impacting gender equality and women's rights in New York, and address poverty and diversity problems and strengthening institutions and financing with a gender perspective.