Summary
“Short Term Holders” are a crucial cohort of Bitcoin owners who inadvertently let us know massive amounts about demand, fear of loss, and the price movement that results. Simply put, if we watch this cohort – who are mainly unaware of their poor Bitcoin strategy – we have the opportunity to benefit from their misfortune. (Don‘t worry – they should figure it out by the next cycle.)
We know that, every four years or so, so far, Bitcoin shoots up in price massively: then crashes down – up to now, by 75-90%. This rise and the following drop are caused 99% by Short Term Holders. Why?
- They see the price shoot up
- They jump on the bandwagon – also called “FOMOing in”
- Just after the peak (typically), they get scared and sell… on the way down… often at a loss. This gives the 75-90% drop.
Their opposite cohort – the Long Term Holders – do the exact opposite: they sell when Short Term Holders are buying: and they buy at the lower prices caused by the Short Term Holders selling almost all that they bought.
[We all “get it” much better the second time we go through the punishing Bitcoin 4-year cycle.]
Uses of the Chart
The STH Supply is great at identifying the “panic” phases of Bitcoin newbies: the panic buying as they see the price shoot up approaching the 4-yearly Bitcoin price peak, followed by the panic selling which follows.
Basically, the Short Term Holders – the newbies – tell us, from this chart, when they are driving the price unsustainably up: and then when they have given up, and are causing the price dump.
The 2017 peak and the March 2021 peak are coincidental with the Short Term Holder Supply peaks. The 2013 peaks are slightly out, but not bad and still helpful. 2013 was still early in Bitcoin’s history, so I expect the next peak in STH supply – maybe in November 2025 – to be more indicative of the price peak.
Variations of the chart
The opposite of STH Supply is – Long Term Holder (LTH) Supply. These are owners of Bitcoin for longer than 155 days. These people are much less likely to “panic and sell”. The cutoff of 155 days separating those who are likely to panic from those who are unlikely to do so is very stark.
This is why we can see that STHer Supply tends to peak at the Bitcoin price peak, LTHers bottom at that point.
This fact can be used to help watch the “dance” between the two cohorts at market tops – and at market bottoms. Interpreting the dance helps you judge when best to sell to maximise profits – and when to buy back.
Will this predict the highs and lows?
Yes – mainly the peaks. STH Supply peaks quite reliably at the time that price peaks.
If you look at April 2021, December 2017, the two 2013 peaks, the pattern is slightly different each time: but there is a trend. The flow of STH Supply (the number of coins owned by holders of < 155 days) is a great clue as to when the Bitcoin price will peak.