The recovery in the cryptocurrency market is underway, with the price of Bitcoin (BTC) surging 28.5% in October. However, the most important question is whether the 2023 increase is already the beginning of a new bull market or a period of unwinding after the market bottom.
On-chain analysis provides clues about the stages of the Bitcoin and cryptocurrency market cycle we are currently in. One of the more interesting indicators is the HODL Waves, according to which almost 90% of BTC supply has not moved for the last 3 months.
In addition, many late investors from the previous cycle have turned into long-term hodlers (LTHs). They didn’t manage to realize profits around the current all-time high (ATH) of $69,000 from November 2021.
That’s why they are now keeping their diamond hands and waiting to sell until the cryptocurrency bull market takes off for good. In previous cycles, it was their movements that marked the beginning of a mature bull market.
HODL Waves Indicator for More than 3-Month Supply of BTC Reaches ATH
HODL waves is an on-chain indicator that compiles all active supply age bands, or so-called HODL waves. Each colored band shows the percentage of existing Bitcoins that have been recently moved in the indicated period. The closer the color approaches red, the younger the coins are transferred. The closer it approaches purple, the older the coins are.
It is worth noting that over time, a given coin that remains in HODL mode (is not transferred) changes its color towards purple. When coins are transferred, HODL waves indicator immediately qualifies it for the youngest red band, which determines transfers during the last hours and days.
A very interesting situation that HODL waves currently show applies to all age bands that are older than 3 months. On the chart of the long-term holders’ bands – from yellow to purple – we see a new all-time high (ATH). Currently, as much as 89.1% of BTC supply is not moving, not traded, and not changing hands.
In the previous cycle, it was 83.5% just before the cycle bottom in December 2018. In contrast, two cycles ago, the supply that had not moved for more than 3 months reached the historic ATH of 85.6% in July 2015.
Interestingly, this is happening despite a clear recovery in the cryptocurrency market. However, as BeInCrypto reports, most investors remain in HODL mode due to the impending Bitcoin ETF spot approval, which is expected in late 2023 or early 2024. The upcoming halving of Bitcoin, which has historically been the catalyst for a mature bull market in the cryptocurrency sector, is also not insignificant.
ATH on the HODL waves chart above 3 months was also noted by well-known on-chain analyst @DylanLeClair_. He pointed out that long-term investors hold their coins tightly in anticipation of higher prices. Then he wrote:
“Wall Street is gonna have to really pump this thing to get hodlers to part with their coins.”
Realized Cap HODL Waves Suggest the End of the Accumulation Phase
Another way to illustrate the HODL waves indicator is called Realized Cap HODL Waves. This is simply our indicator divided by the realized price. The latter is determined by realized market capitalization divided by current supply.
In the Realized Cap HODL Waves chart below, we see that, historically, a mature bull market has been characterized by a sharp rise in the red and orange age bands of BTC coins. On the contrary, the bear market was characterized by an increasing dominance of yellows and declines in reds.
However, one band of the age of HODL waves remains of particular interest in determining the timing of the transition from a bear market to a bull market and the end of long-term accumulation. This is the light green band. It designates coins that remain unmoved over a period of 2-3 years.
These investors were late to buy in the previous bull market, did not book profits and held their BTC throughout the bear market and accumulation.
Late Investors Key to a Mature Bull Market
If we now isolate just this cohort of HODL waves we can see that its behavior gives clues to the start of a mature bull market. Well, it turns out that in the previous two cycles the behavior of holders of these coins was very similar.
The surge of holders in the 2-3 year band (blue arrows) took place right after the accumulation phase ended. This one followed the macro bottom of the Bitcoin price (red rectangle). This cohort then reached a multi-month peak as the BTC price slowly climbed, entering a mature bull market (green arrow).
Eventually, almost the entire cohort of 2-3-year-old HODL waves sold their assets (red arrows). This process, which lasted several weeks, was already twice an indicator of the surge in the price of BTC.
Currently, it seems that the surge of 2-3-year holders we have seen since early 2023 may be the first part of the same pattern. If the green band holds now, the BTC price could continue the slow climb typical of an early bull market.
On the other hand, if it turns out that hodlers in the 2-3 year band start selling in favor of short-term holders, this will be a strong indicator of the final, mature stage of the cryptocurrency bull market.
For BeInCrypto’s latest crypto market analysis, click here.