Data suggests short-term holders sold off the most Bitcoin in the recent dump, while long-term holders have continued to keep their BTC
According to this report by Coinmetrics, Bitcoin’s recent fall in price was a sell-off by short-term holders, and not institutional investors trying to offset losses in other markets, as reported at the time.
Although Bitcoin’s price has shown some signs of recovery since the crash, the price still has room to fall, as it traded below the VWAP (volume weighted average price) over the weekend on smaller timeframes, indicating that bearish momentum is still in play.
As there are currently 51 days estimated before the next halving, it could be that another shakeout is on the way to allow miners to maximise the Bitcoin they can harvest before that point.
On the 11th March, one day before the crash, 281,000 BTC that had been untouched for at least the preceding 30 days suddenly started to move to exchanges from their respective wallets. For comparison, only 4,131 BTC that had been inactive for over a year became active, showing that long term holders were a small percentage of those that sold off their Bitcoin.
Some have claimed that the most likely suspects of the short-term moves were miners, as this group fits the profile of short-term holders with significant liquidity and they had good incentive to bring the price of the coin down ahead of the halving in May.
This article by Cointelegraph further explores this theory, citing that the miners had good incentive to dump the market for their benefit, as well as to strengthen their position ahead of the halving. The dump would have severely impacted competitors, such as the miners who leverage their Bitcoin on exchanges such as Bitmex, as well as shaking out market manipulators, such as PlusToken, who were also suspected of contributing to the dump.
Also, there is the question of whether the gains seen at the beginning of 2020 were in fact also caused by miners not selling off their mined BTC as in anticipation of the dump. This can be observed in the increase in mining difficulty, which resulted in price increases as miners were required to increase their output for Bitcoin’s POW protocol (proof of work), meaning less Bitcoin was sold by miners.
This news, if Coinmetrics’ theory is true, will potentially rekindle the idea of Bitcoin as an investment haven, as it may be that Coronavirus only exacerbated the fall in price, sweeping up retail investors and giving miners the shakeout they wanted.
All of the previous halvings have been followed by strong price action in their aftermath due to shifts in supply and demand.
What makes the 2020 halving more significant than the last one in 2016 is the growing maturity the crypto space has seen in recent years, with renewed institutional interest, more use-cases and the introduction of regulation from several governments around the world that have recognised Bitcoin as a financial asset.