As bitcoin’s price consolidates and traders speculate about the asset’s next trajectory, the market intelligence platform Santiment has highlighted how supply distribution trends can offer insights into the cryptocurrency’s price movement.

Supply distribution data shows how different groups of investors hold cryptocurrencies. This metric takes into account the wallet sizes of small and large investors, especially whales and users who own non-empty wallets.

The Effect of Supply Distribution Trends

According to a Santiment report, historical data has shown that Bitcoin bull runs start when whales increase their holdings amid panic sales from smaller traders. Whales accumulating from retail investors often foster an environment for long-term price appreciation.

In the Bitcoin market, retail investors are seen as those holding 0.01 or less BTC, while whales are those having 100 or more BTC. Before BTC experiences a big surge, small retail wallets are often found holding less and less of the asset’s supply, while whales scoop up the bitcoins they are offloading.

Santiment cited data from BTC surges in June 2023 and October 2023, highlighting the ratio of BTC held by retail investors and how they began to dip before the rallies started. At the same time, whales start to accumulate more. Whenever small wallets start increasing rapidly, Santiment said it may be a warning that the Bitcoin market is overheating and a correction is near.

“If whale wallets (10+ BTC) are accumulating, it suggests that smart money is buying, which historically leads to price increases over time. However, if they are declining, it may indicate that large investors are taking profits, which could lead to a price drop,” Santiment added.

Bullish or Bearish?

Besides the supply distribution trends among retail investors and whales, Santiment also highlighted the importance of monitoring an asset’s total number of holders. This refers to the number of non-empty wallets existing on a network, especially as such wallets make up the vast majority of addresses in a blockchain.

At the time of writing, 42.26 million wallets held less than 0.01 BTC, which made up 77.4% of the overall 54.62 million non-empty wallets. If this number rises quickly, the chances of a market correction are high; however, if it begins to consolidate, then that is a bullish sign.