Bitcoin's recent price movements around $101,000 signal a crucial shift in its on-chain dynamics. After months of steady accumulation, long-term holders (LTHs) are beginning to distribute. This, combined with a pivot from inflows to outflows in spot Bitcoin Exchange Traded Funds (ETFs) and broader liquidity pressures, is reshaping the delicate balance between supply and demand. A mechanical tension is building, setting the stage for Bitcoin’s next significant price squeeze.
The Great HODL Unwinds: Illiquid Supply in Motion
For an extended period, a substantial portion of Bitcoin's supply remained illiquid, held firmly by long-duration wallets. This "Great HODL" saw illiquid supply reach nearly 14.4 million BTC, representing about 72% of circulating coins – a multi-year high. However, since mid-October, this trend reversed. Roughly 62,000 BTC moved out of these illiquid cohorts, marking the first notable downtick in the latter half of the year. This indicates LTHs realizing profits, expanding the tradable float and typically stalling rallies until fresh demand absorbs the increased supply.
The Mechanics of Supply and Demand Dynamics
The transition from a market stall to a potential squeeze is governed by a precise interplay of factors. Post-halving, Bitcoin’s issuance is fixed at approximately 450 BTC daily. This constant supply interacts with three crucial variables:
- Long-term holder distribution.
- Miner selling pressure.
- Institutional fund and treasury absorption capacity.
If demand from ETFs and balance sheet buyers exceeds new issuance plus holder distribution, the available float tightens, driving Bitcoin’s price upward. Conversely, insufficient demand can lead to corrections as older cohorts reduce exposure.
Recent Headwinds: ETF Outflows and LTH Distribution
Early November brought significant headwinds from fund flows. U.S. spot Bitcoin ETFs recorded sizable net outflows ($566M on Nov 4th, $137M on Nov 5th, partially offset by $240M on Nov 6th). These multi-day redemptions, nearing $2 billion, highlight how concentrated U.S. demand from a single large issuer can amplify market swings.
Concurrently, LTH behavior indicates net distribution. Glassnode’s 'Week On Chain' reports increased activity from older cohorts, especially on "green days" when prices rise. This pattern often signals profit-taking near local market tops. A key turnaround indicator will be a fade in spending from over one-year bands during upward movements, suggesting supply is re-tightening.
Miner Behavior and Key Indicators
Miner behavior, though often marginal, impacts supply, particularly when hashprice is low. Despite fixed issuance, miners showed a negative net position change in late summer, with transfer spikes to exchanges reappearing in mid-October. If hashprice is pressured, hedging or sales can add 200-500 BTC daily to market outflows, shifting sentiment when fund demand is finely balanced.
The Short-Term Holder (STH) realized price serves as a vital "cost basis rail." In past bull cycles, this metric transitioned from resistance to support as broader demand absorbed distributed coins. Holding above this line after pullbacks indicates a constructive phase; losing it often signals range-bound markets as LTHs continue to trim.
The Supply-Demand Equation: Path Forward
At approximately $101,000 per Bitcoin, daily issuance of 450 BTC equates to about $45.45 million. For perspective, $50 million in ETF demand is roughly 495 BTC daily. The recent spike in LTH distribution, averaging around 4,430 BTC per day over two weeks, underscores significant market supply.
The market's current stall reflects this dynamic: declining illiquid supply, negative fund demand, and miner outflows. This combination increases tradable float and caps upward momentum. For a renewed advance, LTH distribution must slow, and ETF issuance needs to consistently outpace new Bitcoin printing. When these conditions align, illiquid supply can resume its climb, potentially allowing prices to advance even without massive new cash inflows.
Traders should monitor a concise checklist:
- Track Glassnode’s Illiquid Supply Change for signs of reaccumulation.
- Observe the Short-Term Holder realized price during dips for support.
- Monitor Spent Output Age Bands for a fade in over one-year spends on green days.
- Keep daily ETF creations (in coin terms) aligned against the ~450 BTC daily issuance.
Should miners ease distribution while these indicators improve, the market float will tighten, potentially breaking Bitcoin out of its current range and setting the stage for its next real squeeze.
Source: CryptoSlate
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