In today’s on-chain analysis, BeInCrypto takes a look at the HODL Waves and Realized Cap HODL Waves indicators for Bitcoin. The goal is to try to determine which phase of the bear market is the largest cryptocurrency and digital asset market overall.
HODL Waves is an on-chain indicator that shows a set of all active supply age bands. Each colored band shows the percentage of current BTC supply that was last moved over a given time period.
Colors ranging from yellow (6-12 months) to purple (over 10 years) indicate BTC supply that lasted more than 6 months ago. Therefore, this range can be effectively used to predict the behavior of long-term holders (LTH) of bitcoin. By definition, they hold their assets for at least 155 days or a little more than 5 months.
On the longer term HODL waves chart for the range of bands we have set, we can see that their shape is approaching an all-time high (red line) today. There have been situations in the past where such a large percentage of BTC supply remained dormant for more than 6 months. These were correlated with periods of accumulation prior to the end of a bear market or an upcoming bull market (red circles).
Ehsaas Cap HODL Waves
A similar perspective is provided by the derivative of the HODL Waves indicator, which weights it by the actual value. The latter is the actual market capitalization divided by the current supply. The resulting ratio is called Realized Cap HODL Waves. This also includes the short and long term age bands of recently active supply.
If we also include only longer term waves (more than 6 months) here, we get a chart of large growth of this range in historical bear markets. The wave peaks of this range were reached at the end of the long-term bear market (blue arrow) and in the March 2020 crash (green arrow).
Furthermore, subsequent peaks are lower and a descending trend line (black) can be drawn. The current percentage of longer term bands is approaching the line. However, it is worth noting that the current growth in the longer range of Realized Cap HODL waves has been very dynamic in recent weeks. Meanwhile, the last two historical peaks were reached in a more generous, “rounded up” way.
The inverted chart of Realized Cap HODL Waves provides additional insight into this situation. It only takes into account short-term supplies of less than 6 months. Here we see a systematic reduction in the supply of short-term holders during periods of long-term bear markets.
Also an upward trend line (black) can be drawn on this chart. This indicates that with successive cycles more short-term supply remains in the market and corrections become slightly less deep. If the trend line persists this time as well, we can expect a rally in the bitcoin market soon.
For previous bitcoin (BTC) analysis from BeInCrypto, click here,
