Long-term HODLers triggered sell-off from price highs
The falling values of cryptocurrencies since December 2017 highs are down to long-term HODLers selling their investments to take advantage of record price highs, according to a new study.
As prices had dropped into a perpetual bear market, many have naturally assumed that the fall was caused by shakey-handed new investors who panicked when values pulled back.
New research from blockchain analytics firm Chainalysis, however, reveals that it was, in fact, long-term investors who triggered the decline.
The study found that it was these long-term HODLers, who held large quantities bought as much lowers prices, couldn’t resist cashing it when values went to the moon.
Researchers believe that long-term HODLers sold off their digital assets to the tune of $30 billion worth of Bitcoin between December 2017 and April 2018.
According to Chainalysis, the firm wrote in its report:
“This was an unprecedented sell-off and such an opportunity is unlikely to be repeated soon.”
These former long-term HODLers largely sold to new speculators, according to Chainalysis, and not other long-term investors.
This move shifted the balance of Bitcoin wealth away from those with a proved ability to HODL to buyers who may not have planned for a multiple-year bear market.
No stomach for a bear market
The conventional wisdom surrounding the decline is those fair-weather investors, who had bought Bitcoin close to its all-time high, sold at the first sign of the downturn.
The influx of new speculators, however, has actually depressed the price of Bitcoin due to these buyers being quicker to sell their holding than long-term investors.
The report notes, in fact, that since the sell-off started in December, the amount of BTC available for trading has risen by 57 percent.
Currently, the circulating supply of Bitcoin is split almost 50/50 between speculators and investors.
The report did highlight one ket advantage to the sell-off however.
Bitcoin wealth is less concentrated now than it was prior to 2017 since speculators typically own fewer coins than long-term investors.
They are also less-inclined to HODL, which means that more demand is required to move the price needle in a direction more positive.