BTC On-Chain Analysis: Long-Term HODL Waves Indicate The End Of A Bear Market


In today’s on-chain analysis, BeInCrypto takes a look at the HODL Waves and Realized Cap HODL Waves indicators for Bitcoin. The goal is to try to determine what stage of a bear market the largest cryptocurrency and overall digital asset market is in.

HODL Waves is an on-chain indicator that displays a set of all active supply age bands. Each colored band indicates the percentage of existing BTC supply that was last moved in a given time period.

Colors ranging from yellow (6-12 months) to purple (10+) illustrate BTC supply that moved more than 6 months ago. Therefore, this range can be effectively used to estimate the behavior of Bitcoin’s long-term (LTH) hodlers. By definition, they hold their assets for a minimum of 155 days, or just over 5 months.

On the long-term HODL Waves chart for the range of bands we have defined, we can see that their size today is near an all-time high (red line). There have been situations before where such a large percentage of the BTC supply has been idle for more than 6 months. These were correlated with the end of a bear market or a period of accumulation before a next bull market (red circles).

Chart by Glassnode

HODL Waves cap made

A similar perspective is provided by the derivative of the HODL Waves indicator, which weights it by realized price. The latter is the realized market capitalization divided by the current supply. The resulting report is called Realized Cap HODL Waves. It also includes short-term and long-term age bands of recent active supply.

If we only include long-term (6-month) waves here, we get a chart of the big rises in this range in historical bear markets. The wave peaks in this range were reached at the very end of the long-term bear market (blue arrows) and during the March 2020 crash (green arrow).

Chart by Glassnode

Also, the following peaks are lower and a descending trendline (black) can be drawn. The current percentage of long-term bands is approaching the line. However, it should be noted that the current rise in the long-term realized wave range Cap HODL has been very dynamic in recent weeks. Meanwhile, the previous two all-time highs were reached in a more subdued, “rounded” fashion.

An inverted chart of completed Cape HODL waves provides additional insight into this situation. It only takes into account short-term supply of less than 6 months. Here we see a systematic reduction in the supply of short-term holders during periods of longer-term bear markets.

Also on this chart, a rising trend line (black) can be drawn. It shows that with successive cycles, there remains more short-term supply in the market and the corrections become slightly shallower. If the trendline holds this time around as well, we can expect a rebound in the Bitcoin market soon.

Chart by Glassnode

For BeInCrypto’s previous Bitcoin (BTC) analysis, Click here.


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