Long-Term Holder (LTH) Supply: Bitcoin On-Chain Analysis

Investing
Updated: 9th Nov 2021
Written by Sean Graytok
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The ability to analyze different cohorts within Bitcoin’s supply makes it unlike any other asset.

This article will define Long-Term Holder Supply and explain why it’s an important on-chain metric to monitor.

What is Long-Term Holder Supply?

Long-Term Holders are investors that are committed to hodling over a long period.

Glassnode conducted a study that showed a coin becomes statistically unlikely to be spent once it crosses the 155-day mark in age.

Identifying this threshold allowed them to separate the market into two cohorts of Short-Term Holders (STH) and Long-Term Holders (LTH), where:

  • LTH: coins older than 155-days
  • STH: coins younger than 155-days

Separating the market like this provides valuable insights into the behavior of “the smart money,” which tends to be Long-Term Holders.

Analyzing changes in LTH supply, or the total amount of coins held by LTHs that have not moved in at least 155 days, has been useful when determining the market structure and the current stage of a given cycle.

Understanding LTH Behavior

Smart money (LTHs) accumulates during periods when they think bitcoin is cheap.

Bitcoin tends to be cheap following price crashes and throughout bear markets, so LTH supply historically increases when there is fear in the market.

Once the price begins to recover and gains some positive momentum, LTHs will distribute their coins to new market entrants, often STHs, that came into the market because of the price increase.

LTHs distributing their coins to STHs decreases LTH supply and increases STH supply.

Price eventually runs out of momentum and tops out, then has historically fallen somewhere in the range of 50% to 80%.

Fear returns to the market, and smart money begins to buy.

They’ll continue to accumulate and get their coins back from STHs on the cheap until price action gains enough positive momentum, however long that may be, at which point they’ll start this cycle over again.

This hypothetical scenario captures the important relationship between LTHs and STHs.

Generally speaking, these two cohorts demonstrate opposite behaviors during bull and bear markets. STHs take the other end of LTH trades and vice versa.

Understanding this relationship helps to identify market structure trends and potentially forecast an approaching bull or a bear market.

How to Read LTH Supply Charts: Interpretation + Analysis

LTH behavior is clear when you look at the LTH supply (orange) and bitcoin price (black) chart:

Bitcoin Total Supply Held by Long-Term Holders

We can see the LTH supply (orange) trend downward each time price spikes, and the LTH supply trend upward each time price corrects.

Let’s zoom in on some of these to make the LTH behavior explicitly clear.

Here’s the first pump in the 2013 bull market:

Llong-Term Holder Supply Bitcoin Metric

Once price gained momentum, LTHs sold into it.

Then, we see price action reversed following the mid-cycle top:

Long-Term Holder (LTH) Supply

LTHs quickly began accumulating after the mid-cycle top as they believed bitcoin to be cheap.

Demand returned and sparked the second leg of the bull market:

Long-Term Holder Supply Chart

We see LTHs distributed a little early on the second pump, and rightfully so. This was in 2013 when data was limited, and little market precedent had been set.

Price eventually topped out and fell to a level that attracted LTHs, and they began to rapidly accumulate:

LTH Supply Bitcoin On-Chain Metric

Below, we see that they continued to accumulate throughout several years of sideways price action:

LTH Supply Chart Examples

Their patience paid off as new demand finally returned to the market, sparking the 2017 rally:

LTH Supply Chart

Price reached a point where LTHs had enough liquidity to exit the market, and they began to distribute to STHs.

Demand eventually dried up and caused price weakness following the 2017 top:

LTH Supply Weakness

And the LTHs began accumulating again.

In each of these examples, we can see that smart money doesn’t perfectly call each top and bottom.

Sometimes they’ve distributed and accumulated a little early, but they’re pretty close.

Them being early is why LTH supply is thought of as a “leading indicator.”

As previously mentioned, STHs are on the other end of these trades. So every time you see an “LTH increase,” there’s an “STH decrease” as well.

LTH Supply: Frequently Asked Questions

What are on-chain supply metrics in Bitcoin?

On-chain supply metrics are used to analyze the trading behavior between “smart money” and new market participants. These metrics can indicate when a bull market is starting or possibly ending.

What does LTH mean in Bitcoin?

LTH refers to a Long-Term Holder of bitcoin. A coin is considered to be held by a Long-Term Holder once it remains dormant for at least 155 days, which is about five months.

What does STH mean in Bitcoin?

STH refers to a Short-Term Holder of bitcoin. Each time a coin is moved, its “age” resets to zero and is considered to be held by a Short-Term Holder until it remains unspent for a period of 155 days. Once it matures beyond the 155-day threshold, it is considered to be held by a Long-Term Holder.

Bottom Line: LTH Supply

You would have made out pretty well if you followed the smart money thus far.

They buy when there’s fear and sell when there’s greed. This is easier said than done.

Keep Reading:

This article is for informational purposes only. It is not intended to be investment advice.

Sean Graytok
Sean Graytok
Sean is a student of the financial and technology industry. He is interested in the people and companies who are driving the innovation that will change our future.