Key Points
- Bitcoin (BTC) has seen a 200% price rally over the last year, reaching a record high of over $73,000 on March 13.
- Market intelligence firm Glassnode reports that this rally has caused a shift in investor behavior, moving from long-term holders to new investors.
The price of Bitcoin (BTC) has seen a significant increase of more than 200% over the past year, reaching a record-breaking high of over $73,000 on March 13.
Investor Sentiment Shifts
This dramatic price rally has shifted investor sentiment towards a state of euphoria, characterized by a rotation of wealth from long-term holders to new investors, as per market intelligence firm Glassnode.
The firm's recent report indicates that Bitcoin's surpassing of the $69,000 all-time high set in November 2021 marked the fourth new cycle all-time high (ATH) in history.
A significant rally above $72,000 has moved this phase of the Bitcoin bull run into the 'Euphoria Zone', a stage that often coincides with new ATHs.
Data from Alternative supports this, showing that market sentiments and emotions are currently in the 'extreme greed zone' at 81.
In this zone, investors tend to become greedy as the market rises, leading to a fear of missing out (FOMO) as speculators enter the market.
Wealth Rotation from Long-Term Holders to Speculators
Glassnode has observed a classic characteristic of Bitcoin bull markets where wealth is transferred from old to young investors.
Investors who accumulated BTC at lower prices several months to years ago have increased their distribution pressure as Bitcoin reached new all-time highs.
This wealth transfer is again in play, with the proportion of wealth held by 'Young coins' (moved within the last 3 months) increasing by 138% since October 2023.
This indicates a net expenditure by longer-term investors who had previously held their coins for at least 3 months.
Additional data from Glassnode shows that the number of new Bitcoin wallets increased by 54% from 308,743 to 475,005 over a span of one month, mirroring BTC’s 58% gains over the same period.
Glassnode analysts report an increase in short-term supply holders by "+810k BTC" since November 2023, believed to come from two sources: "660k BTC transferred from long-term Holders" and "150k BTC withdrawn from exchange balances we monitor."
Conversely, the long-term holder supply has declined by -660k BTC over the same period.
This transfer of wealth appears to be following a similar path to all prior Bitcoin cycles and represents a shifting ownership structure, as well as the dynamic balance between supply, demand, and price.
BTC’s 70% year-to-date rally has sparked profit-booking by long-term holders, balanced by an equal magnitude of inflowing demand from the Short-Term Holder cohort.
This is evidenced by an uptick in the "the Realized Profit metric" — a component of the "Net Realized Profit/Loss metric which provides insight into capital inflows, demand strength and profitability of the network."
The magnitude of Realized profit locked in via on-chain spending reached statistically high levels, trading more than one standard deviation above its long-term mean.
This is one of the signs signaling the start of the ‘Euphoria' phase, as observed during the 2017 and 2021 bull runs.
The realized profit metric has spiked to significantly positive levels, suggesting elevated profit taking and demand for long side leverage.
According to analyst James Van Straten, "accumulation is slightly ahead of issuance" due to "consistent record profit-taking" from both short and long-term holders, which reached $4 billion on March 11.
