Bitcoin (BTC) is in a “dire condition” when it comes to adoption — but a silver lining is already visible, new research says.
In the latest edition of its weekly newsletter, “The Week On-Chain,” crypto analytics firm Glassnode said that Bitcoin was going through a “great detox.”
Current BTC price action is pressuring everyone from long-term holders (LTHs) to miners, and relief is hard to come by.
Macro turmoil and resistance at $20,000 is keeping BTC/USD at levels visited only once since 2020.
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With this week’s push above $20,000 accompanied by major profit-taking, warnings remain that more pain is due for the market first before a recovery takes place.
For Glassnode, sustained lower levels are causing a seismic shift in the Bitcoin investor profile, with retail and speculators — so-called short-term holders (STHs) — now pushed out.
“Network activity remains in a dire condition as network adoption levels slump to levels last seen during the COVID crisis,” it summarized.
“However, one constructive observation would be the expulsion of retail participants from the network leaving just the HODLers class, career traders and everyday Bitcoin users remaining. This suggests the user-base is at its foundational level.”
This reset in network composition could provide a positive nuance in the face of flatlining on-chain adoption.
LTHs, as reported this week, are notorious for their stubbornness during bear markets, and data shows that they are in no mood to sell.
“The HODLer class remain resolute with both mature coin USD wealth reaching ATHs, and a multitude of lifespan metrics fully resetting to historical lows, emphasizing the unwillingness to spend held coins,” Glassnode continued, referencing its latest data analysis.
“This suggests the majority of current market churn is associated with the Short-Term Holder class.”
Despite the increasing prevalence of LTHs as an investor majority, STHs could nonetheless produce some dramatic downside in the event of Bitcoin falling below the $17,600 macro lows seen in June this year.
This, Glassnode explains, comes as a result of the volume gap below that level — meaning that any sell-off could easily snowball into the next bid zone, currently at $12,000.
“A large supply airgap is apparent below $18k until the $11–$12k range,” “The Week On-Chain” states elsewhere.
“Trading below the current cycle low would put an extraordinary volume of Short-Term Holder coins into a deep unrealized loss, which may exacerbate downside reflexivity, and trigger yet another wide ranging capitulation event.”
An accompanying chart showed the lack of volume between the two price areas, this contrasting starkly with the area around $20,000, now full of STH interest.
Macro factors, meanwhile, have chiefly contributed to other warnings over BTC price stability in recent weeks and months, with predictions including BTC/USD dropping below $10,000.