Bitcoin “Diamond Hands” Return to Buying: Here’s Why It’s a Positive Sign for the Market

For the past five days, Bitcoin has been fluctuating within a narrow band between $106,229 and $111,807, following its latest peak of $111,814. Despite increased selling pressure from miners after this peak, Bitcoin has maintained a level above $108,000, with on-chain metrics indicating that holders with a strong resolve are managing the selling pressure effectively.

Long-Term Holders Accumulating Without Major Expenditure

Data from an analytics platform reveals that the Long-Term Holder (LTH) Spending Binary Indicator has dropped to its lowest point since September 2024. This noteworthy trend was pointed out by a cryptocurrency analyst on social media.

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The 15-day moving average of this indicator, as illustrated in the accompanying chart, has entered a low-spending zone, which has historically preceded a bullish movement in Bitcoin’s value.

Simultaneously, the supply held by long-term holders has experienced an increase of roughly 300,000 BTC over the past three weeks. This marks a deviation from the downward trend observed in this group since 2024. Currently, around 14.6 million BTC, which is nearly 74% of the total circulating supply, resides in addresses marked as long-term holders.

This trend indicates that what are known as “diamond hands,” or investors who possess strong conviction and hold through market fluctuations, are not only withholding sales following Bitcoin’s latest peak but are also actively increasing their holdings. The following chart illustrates the relationship between low LTH spending and rising prices, a phenomenon that has been observed alongside Bitcoin’s upward trends in previous years.

Why This Is Positive For The Market

The notable increase in long-term holder supply, combined with minimal selling activity, highlights a concealed strength within the market. Current actions of long-term investors reflect their trust in Bitcoin’s current valuation, despite recent price increases. Many in this category are experiencing substantial profits yet opt to hold. This behavior contrasts sharply with that of short-term holders, who have collectively realized profits exceeding $11.6 billion in just the previous month.

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Analyzing historical data reveals that the ongoing drop in long-term holder (LTH) spending resembles patterns seen in September 2024. During that period, the LTH Indicator stood at a low level and saw a steady rise in the supply among long-term holders.

Subsequently, Bitcoin experienced a stunning 96% uptick, climbing from about $54,000 to peaks nearing $106,000 in the following months. If the current price follows a similar path, a 96% surge would suggest a new peak around $212,000.

At present, Bitcoin is trading at $109,000.

Image from Getty Images, chart sourced from Tradingview.