An on-chain study by blockchain analytics firm Glassnode states that the "final flush" of sellers, signaled by a recent surge in short-term Bitcoin BTC/USD holdings, demonstrates that capitulation events have come to an end and the cryptocurrency market is now prepared for months of accumulation.
330,000 BTC added by STH
Short-term holders (STHs) have raised their holdings by 330,000 BTC since the devastating Terra crash in May, according to the recent "The Week On Chain" report, pointing in the direction of a market recovery.
Short-term Bitcoin holders purchased extremely cheap coins at or around $20,000 during the massive sell-offs that occurred in May through June, establishing a new trend and placing themselves in an "advantageous financial position."
STH supply increasing due to LTH outflow
The study indicates that the main contributors to the increase in STH supply were exchange net outflows since May and an outflow of almost 200,000 coins from long-term holders (LTHs).
These factors all lead to a capitulation, the study claims, adding that STHs "stepped in during the flush out, and now own coins with a drastically lower pricing basis."
STHs are wallets that have only held Bitcoin for 154 days or fewer. At 155 days, they attain LTH status.
STHs generally acquire coins at or near all-time high prices and sell them for much less because "extreme STH accumulation is typically contemporaneous with bull market topping patterns."
Positive divergence observed
Purchasers, according to Glassnode, were bucking this trend starting in May and June, which resulted in a "constructive divergence."
Such occurrences represent a transfer of coins to new purchasers who are initially classified as STHs, but have a low-cost basis and are in an advantageous financial position to HODL from that point on, the analysis stated.
Experts must decide if market can hold on
Experts must decide how to proceed with a market reversal after determining if the new STHs from May and June "have the conviction to hold on" and contribute to future price increases, Glassnode states.
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