Bitcoin’s HODLer (BTC) volume has marked previous highs and the start of bull cycles. With the dominant cryptocurrency heading for $ 30,000, HODLer activity could be a useful tool to measure BTC’s next peak.
Bitcoin’s HODLing activity has increased steadily since October, as Cointelegraph reported. Fewer HODLers have shifted their stocks, indicating an overall bullish market sentiment.
Why HODLer Activity Is Important To Judging Sentiment In The Bitcoin Market
The term “HODLer” refers to long-time owners of Bitcoin. It is possible to track the activity of HODLers by evaluating addresses that have not moved BTC in several years.
If HODLers move their fortunes while the price of Bitcoin is rising, it could indicate an intention to sell to make a profit on the rally.
Conversely, if HODLers shift their wealth when the Bitcoin price drops, it could mean they are doubling their investments.
Based on Bitcoin’s price action, an increase in HODLer activity could signal that a major price move is imminent.
Currently, the HODLer volume suggests that a prolonged Bitcoin pullback is unlikely to happen. Volume remains low compared to previous peaks, which shows that long-time owner confidence remains high.
However, the HODLer volume could lag and start rising as the price of Bitcoin collapses in the short term. In this case the possibility of an extended correction could still arise.
Hence, it would be important to watch the HODLer volume in the short term, especially if Bitcoin is struggling to rise above $ 30,000.
Technical dynamics have pushed the price of Bitcoin higher in the past few months. However, if this slows down, HODLers could move on to selling and expect a correction due to the large number of investors sitting on unrealized gains.
BTC becoming scarcer is a variable
Until HODLer volume climbs to previous highs, it would be premature to predict any sizeable decline in the short term.
Various macro factors such as the falling dollar and the decline in Bitcoin liquidity have made BTC more attractive as a store of value, especially for institutions.
Cointelegraph previously reported that Bitcoin is becoming less fluid due to the increase in HOLDer activity.
This means that less BTC could be bought or sold, making BTC scarcer over the course of 2021.
Rafael Schultze-Kraft, 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 is squeezed, investors are hoarding, accessible BTC is becoming scarcer. 1M BTC have become illiquid this year i.e. H. They are held by spending companies