Bitcoin long-term holders massive dumping: Is 2021 history repeating itself?

Long-term holders (LTH) of Bitcoin have begun to reintroduce BTC to the market for the third time, with supply decreasing by 12.4%, remarkably similar to the 13.5% reduction before the peak of the 2021 cycle. This behavior pattern may signal a key turning point in the current market cycle, while the low participation of short-term holders and insufficient inflow of new funds may limit the potential for future price pumps.

2021 Historical Reenactment? Long-term holder behavior reveals key signals in market cycles

According to the latest research by DeFi report founder Michael Nadeau, the current Bitcoin market is showing an astonishing similarity to the 2021 cycle. During the 2021 cycle, long-term holders began a major distribution phase between November 2020 and March 2021, reducing their supply by 13.5% before Bitcoin peaked in April 2021.

Nadeau believes that the peak in April 2021 was the “real” cycle top, rather than the second peak in November of that year. This is because the first peak was driven by a large-scale transfer of funds from long-term holders to short-term holders (STH), injecting new liquidity into the market. In contrast, the second peak was relatively flat, mainly driven by the reallocation of existing holdings, lacking new capital inflow.

Currently, the same structure is being presented in the current cycle:

· The supply of long-term holders has decreased by 12.4%, approaching 13.5% of the 2021 cycle.

· This could mark the “real” peak of Q1 2025.

· Since then, the trend of reaccumulation has begun, very similar to the phase after April 2021.

· Key difference of the current cycle: Low participation from short-term holders

The biggest difference from the 2021 cycle is that the participation of short-term holders (STH) is still very low, with almost no evidence of new funds entering the market. Nadeau stated that this sluggish demand may limit the strength of future rebounds, making it easier for the market to form a double top structure similar to that of 2021.

In this case, the behavior of short-term holders and the time-driven transition of holders, rather than widespread capital inflow, will determine the price trend in the later stages.

Glassnode data shows that market vulnerability persists

Glassnode's analysis further confirms the market's vulnerability. Despite the emergence of mild signs of recovery, Bitcoin's price will face downside risks if new demand cannot be restored.

Multiple market indicators show contradictory signals:

Spot market: RSI has entered the overbought zone, but trading volume remains flat and CVD (Cumulative Volume Delta) is weakening, indicating that sellers continue to exert pressure.

Futures Market: Open interest increases, buyer liquidity drives up perpetual CVD prices, but weak financing indicates a decrease in long-term demand.

Options Market: Open interest has increased, but the volatility spread has narrowed, and the skew has significantly decreased, indicating reduced hedging and increased complacency.

On-chain data is mixed

On-chain indicators also show a complex market situation:

· The number of BTC addresses is approaching a cyclical low, indicating limited user growth.

· The transfer volume has increased, indicating capital inflow.

· The transaction fees have decreased, reflecting the soft demand for block space and weakened speculative pressure.

· Investors generally profit, but the increase in profit-taking suggests potential demand exhaustion.

Market Outlook: Beware of Possible Reappearance of Double Top Structure

Comprehensive analysis indicates that the Bitcoin market may be at a critical turning point. The distribution behavior of long-term holders is remarkably similar to that before the 2021 cycle peak, while the participation of short-term holders is sluggish and new capital inflows are insufficient, which could lead to a similar double-top structure as seen in 2021.

Investors should closely monitor the subsequent behavior of long-term holders and the changes in participation of short-term holders, as these factors will determine the future trajectory of the current market cycle. At the same time, market vulnerabilities persist, and once volatility re-emerges, it could trigger significant price reactions.

As the Bitcoin market enters this critical stage, adjustments in investment strategies and risk management will become particularly important. Are long-term Bitcoin holders experiencing a massive sell-off: is history repeating itself from 2021?