The cryptocurrency market is showing signs of recovery, with Bitcoin’s price surging 28.5% in October. However, it’s important to determine whether this increase marks the start of a new bull market or if it’s simply a period of unwinding after hitting the market bottom. On-chain analysis provides insights into the current stage of the Bitcoin and cryptocurrency market cycle. One interesting indicator is the HODL Waves, which reveals that nearly 90% of BTC supply has not moved in the past three months. Many late investors from the previous cycle have become long-term holders, waiting for the cryptocurrency bull market to take off before selling their assets. In previous cycles, their movements indicated the beginning of a mature bull market.
The HODL Waves indicator tracks the age bands of active supply and shows the percentage of Bitcoins that have been recently moved. The closer the color is to red, the younger the coins are, while purple indicates older coins. Currently, more than 89% of BTC supply has not moved in over three months. This is higher than previous cycles and suggests that investors are holding onto their coins despite the recovery in the cryptocurrency market. They are likely waiting for factors like Bitcoin ETF approval and upcoming halving events to drive prices even higher.
Another way to analyze the HODL Waves indicator is through Realized Cap HODL Waves, which divides the indicator by realized price. This chart reveals that a mature bull market is characterized by a rise in red and orange age bands of BTC coins, while bear markets see an increase in yellow bands and declines in red bands.
One particular band to watch for determining the transition from a bear market to a bull market is the light green band, which represents coins that haven’t moved for 2-3 years. In previous cycles, a surge in this cohort marked the end of accumulation and signaled the start of a mature bull market. Eventually, these holders sold their assets, indicating a surge in the price of BTC. The current surge of 2-3-year holders may follow the same pattern, and if they continue to hold, it could indicate a slow climb in BTC price as an early bull market. However, if they start selling, it would suggest the final stage of the cryptocurrency bull market.
In conclusion, the HODL Waves indicator provides valuable insights into the behavior of Bitcoin investors and can help determine the current stage of the cryptocurrency market cycle. The high percentage of BTC supply that hasn’t moved in over three months suggests that many investors are holding onto their coins in anticipation of future price increases. Monitoring the behavior of long-term holders and analyzing age bands can provide clues about the transition from a bear market to a bull market.
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