We also see this March 2020 recovery fractal in the Short-term Holder MVRV. This metric will trade at 1.0 when price is equal to the onchain cost basis of STHs. After a capitulation event (MVRV < 1.0) and relief rally (MVRV > 1.0), STHs who accumulated on the way up are having their conviction to hold tested.
Prices have returned to the cost basis of short-term holders. Given we estimated ~58% of them are already underwater, the key question is whether these buyers from August and September will sell their coins at a loss and drive prices lower. The other question is whether the HODLers who remain can provide enough buy side support if they do?
STH-MVRV Live Chart
Conviction to HODL
To answer the second half of this question, we assess the conviction to HODL by existing coin holders amidst fairly historic volatility (and many rolls of the FUD dice).
We start with the Coin-days Destroyed 90 metric (CDD-90) which calculates the cumulative sum of lifespan spent over the last 90-days. This metric will peak when large volumes of old coins are spent (usually in bull markets), and decline during periods of accumulation and HODLing.
CDD-90 is currently trading at very low levels of around 150k CDD. This level is coincident with periods of large scale accumulation, including both early bull markets, and later stage bear markets.
CDD-90 Live Chart
We can also see that the relative supply held by Short-term Holders has reached an all-time low of 20% of circulating supply. This is a rare occurrence that has historically described the late stage accumulation periods of bear markets by the smarter money.
Relative STH-LTH Supply PNL Live Chart
This also manifests as a multi-year low in Highly Liquid supply, a metric that has returned to December 2018 levels. Highly liquid coins are those that are located on exchanges and other venues where coins can trivially change hands with the click of a button.
Liquid and Illiquid Supply Live Chart
We can confirm this downtrend is influenced by the withdrawal of coins from exchanges, which continues at a significant rate. The exchange net position change metric demonstrates a clear change in character and market preference following March 2020. The market shifted from a regime of dominant inflows, to one of outflows. July to September has been a historically significant period of net outflows, ranging between 80k and 100k BTC/month.
Exchange Net Position Change
As coins migrate out of highly liquid exchange balances, and into investor wallets, they start to mature. Initially, these coins are likely to be re-spent in response to market volatility, but over time, the are increasingly considered illiquid, dormant, and more likely to remain in cold storage. These transitional coins are referred to as Liquid supply which we can see has been in macro decline since 2016.
If we consider the total supply of Highly Liquid and Liquid coins, we have 3.117M (HL) + 1.229M (L) = 4.346M BTC freely circulating (~23% of circulating supply).
Liquid and Illiquid Supply Live Chart
The converse of the above charts is that Long-term holders now hold an all-time-high of over 80% of circulating BTC. Of note in the 2021 cycle, is the relatively small distribution of coins that occurred in the Q1-2021 bull compared to previous cycles. LTH supply drew down to only 67.7% of supply where previous cycles were between 54% and 58%.
We can also note the speed of the recovery which indicates that 12.3% of the circulating supply was accumulated in the 2020-21 bull market, and remains unspent today.
Despite relatively low on-chain activity, and a number of market fractals resembling bearish conditions, there remains an undertone of extreme HOLDing and accumulation behaviour. This is somewhat unique to this market cycle and is a dynamic worth keeping an eye on.
Relative STH-LTH Supply PNL Live Chart
