Bitcoin price entering ‘euphoria’ zone amid wealth rotation from ‘HODLers to new investors’ — Data

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Bitcoin (BTC) price has rallied more than 200% over the last year to set a record high above $73,000 on March 13. This rally has pushed investor sentiment “closer to euphoria,” characterized by wealth rotation from long-term holders to new investors, according to market intelligence firm Glassnode. 

Bitcoin breaks its fourth cycle all-time high. Source: Glassnode/X

Bitcoin investor sentiment “entering euphoria zone”

This week’s “The Week Onchain” report by market intelligence Glassnode notes that Bitcoin’s recent clearance of the $69,000 all-time high set in November 2021 created the “fourth new cycle ATH in history.”

Analyst Checkmate cites BTC’s significant rally above $72,000, which has shifted this phase of Bitcoin bull run “into the ‘Euphoria Zone’” — a stage “which tends to accompany new ATHs.”

Bitcoin enters the ‘euphoria zone’. Source: Glassnode

This is reinforced by data from Alternative, which shows that the “sentiments and emotions” in the market are in the ‘extreme’ greed zone’ at 81. In the ‘extreme greed’ zone, just like with the ‘euphoria phase,’ investors “tend to get greedy when the market is rising, which results in FOMO (Fear of missing out)” as speculators enter the market.

Crypto Fear and Greed Index. Source: Alternative.me

Glassnode notes that “this moment has historically triggered a distinct shift in investor behavior patterns, particularly in the relative balance between HODLers and the Speculator cohorts.”

Wealth rotation from “the HODLer cohort to speculators”

The on-chain analytics firm also observed a “classic” characteristic of Bitcoin bull markets where wealth is transferred from “old to young” investors.

The chart below shows that “investors who accumulated BTC at cheaper prices several months to years in the past” have accelerated their distribution pressure as Bitcoin reached new all-time highs.

“This wealth transfer is once again in play, with the proportion of wealth held by ‘Young coins’ (moved within the last 3 months), increasing by 138% since October 2023.”

Bitcoin: Realized Cap HODL waves. Source: Glassnode

Glassnode says this underscores “a net expenditure by longer-term investors who had previously held their coins for at least 3 months.”

This information is corroborated by more data from Glassnode, which shows that the number of new Bitcoin wallets increased by 54% from 308,743 to 475,005 over a span of one month. This increase mirrored BTC’s 58% gains over the same period.

Bitcoin: New addresses. Source: Glassnode

Glassnode analysts report an increase in short-term supply holders by “+810k BTC” since November 2023, and they believe it comes from two sources: “660k BTC transferred from long-term Holders” and “150k BTC withdrawn from exchange balances we monitor.”

Related: Will the Bitcoin halving bring more institutional investors into crypto?

Conversely, the report notes that the long-term holder “supply has declined by -660k BTC” over the same period.

Checkmate said,

“Overall, this transfer of wealth appears to be following a very similar path to all prior Bitcoin cycles and represents both a shifting ownership structure, but also the dynamic balance between supply, demand, and price.”

Bitcoin rally triggers “spot profit-taking”

BTC’s 70% year-to-date rally has sparked profit-booking by long-term holders, “balanced by an equal magnitude of inflowing demand from the Short-Term Holder cohort.” This is evidenced by an uptick in the “the Realized Profit metric” — a component of the “Net Realized Profit/Loss metric which provides insight into capital inflows, demand strength and profitability of the network.”

The report notes,

“This week, the magnitude of Realized profit locked in via on-chain spending reached statistically high levels, trading more than one standard deviation above its long-term mean.”

According to Glassnode, this is one of the signs signaling the start of the ‘Euphoria’ phase, as observed during the 2017 and 2021 bull runs.

Bitcoin: Realized profits. Source: Glassnode

According to Glassnode, the realized profit metric has spiked to “significantly positive levels, suggesting elevated profit taking and demand for long side leverage.”

According to Cryptoslate analyst James Van Straten, “accumulation is slightly ahead of issuance” due to “consistent record profit-taking” from both short and long-term holders, which reached $4 billion on March 11.

Bitcoin: All cohorts vs. issuance. Source: @jvs_btc/X

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.