Bitcoin has been on a roller coaster ride over the past year. Contrary to expectations of a spike after the much-awaited Taproot upgrade, the digital currency slipped from its freshly-scaled peak of over $69,000, shedding close to 20 percent so far this month.

So, where is the legacy coin headed? Bitcoin’s The LTH indicator suggests bitcoin’s bull market might have entered into a distribution phase signifying that market sentiment is mixed. (LTH) indicator flashed red on November 17 for the first time in over six months, pointed out an article by Zycrypto citing on-chain analysis by Glassnode. On-chain analysis (or blockchain analysis) considers fundamental and technical factors for cryptocurrencies to improve investment and trading decisions.

The LTH indicator suggests bitcoin’s bull market might have entered into a distribution phase signifying that market sentiment is mixed. It denotes a temporary halt on a bull mark-up as price enters into another range period signifying profit-taking. However, Glassnode data also suggests these long-term holders are not exactly spending their coins in panic despite the steep correction from the all-time highs.

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Long-Term Holders, according to Glassnode's definition, are those who have owned the coin for more than 155 days. These are usually smart money investors who accumulated cheap coins in the bear and/or early bull cycle and distribute expensive coins late in the bull cycle. This cohort is less sensitive to market volatility, particularly when coins held are at an unrealised gain (that is, cost of the coins is lower than current market price).

Some experts agree this might be a temporary phase like in any market. “Bitcoin’s long-term outlook remains bullish,” OANDA analyst Edward Moya told Reuters, adding, “But the waters over the next few months will be rough as institutional investors look to see if the Fed will be forced to raise rates sooner and trigger a broad-based selloff of risky assets that include bitcoin.” Will Clemente, Lead Insights Analyst, in fact, believes “we’re entering the main phase of the bull market.”

This is “a natural bull market behaviour,” Clement told Zycrypto, pointing out a similar scenario in 2020, when after a spirited run-up, bitcoin prices moved into a distribution phase in October all the way to January 2021 before breaking out higher.

Also Read: Bitcoin heads for worst week in months as Mt Gox payouts loom

(Edited by : Thomas Abraham)

First Published:Nov 19, 2021 8:33 PM IST