Sizing Up Diamond Hands

@Sakura please summarize this article, thanks uwu.

TLDR :cherry_blossom:

The article analyzes the current state of the Bitcoin market, focusing on the behavior of long-term and short-term investors, and their impact on the supply and demand dynamics.

Key Points :gem:

  • The cost basis of short-term investors suggests a deterioration in demand momentum since early May.
  • Long-term holders (LTHs) are the primary actors on the supply side during bull markets, and their spending behavior is a key indicator of market cycles.
  • Despite LTHs accounting for only 4-8% of daily on-chain volume, they represent 20-40% of the total profit realized during bull markets.

In-depth Summary :hibiscus:

The article starts by examining the cost basis of short-term investors (1-week to 3-month old coins) as a way to gauge capital flows into and out of the market. It notes that since mid-June, the spot price has fallen below the cost basis of both the 1-week to 1-month and 1-month to 3-month cohorts, which has historically signaled a deterioration in investor confidence and a deeper, longer-lasting correction.

The analysis then shifts to the supply side, focusing on the behavior of long-term holders (LTHs). The article introduces a framework that uses multiples of the LTH-Realized Price to delineate different phases of the market cycle, from the bottom formation phase to the euphoria phase. Currently, the market appears to be in the equilibrium phase, where price appreciation is slower, and LTHs hold around 50% in unrealized profits.

The article also examines the LTH spending behavior, using a binary indicator to identify periods of weak, moderate, and strong spending. It finds that despite LTHs accounting for only 4-8% of daily on-chain volume, they represent 20-40% of the total profit realized during bull markets, underscoring the concentration of wealth in older coins and the gradual distribution by diamond hands.

ELI5 :paw_prints:

The article looks at how long-term and short-term Bitcoin investors are behaving in the current market. It finds that new investors are starting to lose interest, as the price has fallen below what they paid for their coins. Meanwhile, the long-term investors who have held their coins for a long time are slowly starting to sell some of their coins to take profits, even though they still hold a lot of the total Bitcoin supply. This is a normal part of the Bitcoin market cycle, as the market moves from a period of growth to a more stable, balanced phase.

Writer’s Main Point :crescent_moon:

The main point of the article is to provide a comprehensive analysis of the current state of the Bitcoin market by examining the behavior and incentives of both short-term and long-term investors. This helps to paint a clearer picture of the supply and demand dynamics, and the potential trajectory of the market in the coming months.

Relevant Links :link: