Bitcoin Capitulation Over? Short-term holders bought 330K BTC since Terra collapse

For the first time in over two years, short-term holders (STH) have become more active in the BTC market than long-term holders (LTH), Glassnode said.

The company’s latest market report claimed that this could indicate that the capitulation event in the crypto space has already taken place.

STHs added 300K BTC since Luna collapse

The Terra ecosystem imploded in early May when its native algorithmic stablecoin UST lost its dollar parity. Opportunistic traders took advantage of the way the stablecoin was structured and tied to LUNA, which ultimately resulted in the prices of both assets plunging to mere cents.

Aside from resulting in over $60 billion being wiped from the market caps of LUNA and UST, this collapse had a severe effect on the entire crypto industry. The entire market began to crash, resulting in BTC dumping more than $10,000 in days to yearly lows.

Such extreme volatility, especially when riskier assets fall in value, reveals the nature of investors. Generally, those with higher conviction (considered long-term owners or investors who have also gone through bear markets in the past) tend to hold on, while short-term owners rush to dispose of their assets, very often at a loss.

While this seemed right for some such investors, Glassnode’s latest report showed that others had taken a different view. Ever since the adverse development at the beginning of May, the STH supply increased by more than 330,000 BTC.

This usually only happens during bull markets, when STH buys at the top and sells at the bottom. There have only been a handful of examples where they accumulated during price cuts, the most recent being during the March 2020 COVID-19 crash.

BTC in distribution or accumulation phase?

Glassnode explained that bitcoin usually finds itself in distribution or accumulation cycles. The former is a bull market characteristic as investors are motivated to realize gains, while the latter usually occurs in bear markets.

As of now, the metric showing current sentiment – ​​Supply Active 1+ Years – is just below the previous ATH marked in May of this year at 65%. According to the research firm, this “highlights the significant conviction of buyers from May-July 2021 following the great miner migration”, which can be considered a “constructive mechanic in a bear market.”