how long-term hodler is formed

Long-term (LTH) bitcoin (BTC) investors tend to buy low and sell high, earning them the widespread name of “smart money.” However, getting there is not an easy task. This was noted by market data and analysis company Glassnode in their latest report.

“Anyone with experience in the markets knows that few investors start out as smart money. Instead, you learn by doing, which most often comes from making mistakes, losing money, and making bad business decisions at the wrong time.

According to the firm, “Investors’ first experiences in a Bitcoin bear market are often the most difficult.” States that Few are ready for the extreme volatility or depreciation of more than 75% that BTC has historically experienced..

“Bitcoin investors are rarely born as sustainable (long-term) hodlers. Many enter the market during the peak of bull market euphoria only to see their average underlying value stabilize at painfully high prices.”

Glassnode, a network metrics analysis company.

Glassnode mentions that the “incredibly huge volume of coins trading at a loss during a bear market” is evident. To put this into perspective, he pointed out that, when FTX crashed in November 2022, over 123 million BTC were trading at a loss. from the peak in April 2021.

Unrealized Stress Makes Newbies Sell Their BTC

A large volume of realized losses (coins sold at a lower price than bought) coincides with times when the LTH-MVRV metric is below 1. This indicator tells you that long-term investors are so-called because they have more than 155 days of Bitcoin – major losses.

When this value is below 1, investors are heavily ‘unrealized stress’, which refers to mental dissatisfaction with the losses they bear. Such a scenario makes it “increasingly likely that they will capitulate to their permanent offer,” Glassnode said.

“Although individual investors can capitulate and capitulate in a bear market, it is immediately clear that this flow is hurting growth. right at the bitter end.”

Glassnode, a network metrics analysis company.

In turn, this scenario coincides with the LTH-SOPR indicator when it is below 1, which indicates that long-term investors are selling at a loss. And indicates that when it is less than 0.5, it means that they are doing with a depreciation of more than 50% from the moment of purchase.

The firm emphasizes that if you add to this the analysis of the following graph, it can be determined that LTH beginners exhibit different behavior than more experienced ones. It is the periods when LTH, having lived one market cycle (6 months – 2 years), are most active in the later stages of the bear market, as well as in the early bull market. That is, this group buys high and sells low.

In contrast, LTHs that have lived multiple cycles (2+ years) tend to be more active during the most opportune bull market periods, buying low and selling high.

Glassnode believes that this whole panorama demonstrates that single-stroke performance characteristics often decided to sell when your investment has depreciated by more than 50%. It also reflects that those who bought at bullish peaks often capitulated at cycle lows.

Thus, the revealed patterns of behavior reflect the fact that To become a long-term profitable hodler, you need to go through a learning phase.which consists of understanding market cycles in order to be able to recognize possible good times to buy and sell.

But unfortunately, as the data shows, this usually happens after many investors enter the market at the peak of the bull period, then sell at a huge loss, fearing the price will fall further, and then see the price rise again. This is why various seasoned investors reported by CriptoNoticias say they go through bumps early in their careers.