Key Insights

Recent movements in Bitcoin's dormant coins are capturing the crypto community's attention. The monthly and yearly Coin Day Destruction (CDD) ratio has soared to 0.25, indicating a heightened distribution of Bitcoin held by long-term holders. This shift is unlikely to derail the prevailing rally but may slow its momentum.

The Dormant Coin Distribution Surge

Analysis from CryptoQuant, specifically by analyst Axel Adler, highlighted a notable spike in Bitcoin's CDD ratio on July 24, reaching 0.25 within the price range of $104,000 to $118,000. This territory is crucial, echoing the historical peaks seen in 2014 and the major correction of 2019.

To put things in perspective: In 2014, after a peak of $1,000, Bitcoin plummeted 95% to just $111 in the aftermath of the Mt. Gox scandal. Similarly, in 2019, Bitcoin climbed to $8,000 before a 40% drop following a ban on cryptocurrency trading in China.

The recent CDD spikes suggest that long-term holders are now offloading their Bitcoin holdings onto the market. The negative trend in Holder Net Position Change, which sunk to -134.7k BTC over the past week, reinforces this narrative.

The Impact of Long-Term Holder Behavior

Furthermore, Bitcoin's Long Term Holder Supply has decreased from 14.12 million to 13.88 million, a reduction of 240k BTC. This significant decline implies that as Bitcoin's value has surged, long-term holders are choosing to sell.

Historically, such increased distribution typically precedes declines in price, as it adds downward pressure. Therefore, if this trend continues, it could pose challenges for the current bullish momentum.

Institutional Demand Remains Strong

Interestingly, while long-term holders sell off their assets, institutional demand for Bitcoin remains robust. An analysis of Spot ETF inflows shows that the overall net inflow has stayed positive, apart from the Grayscale Bitcoin Trust (GBTC).

Leading the way is the IBIT fund with assets totaling $57.15 billion, followed closely by FBTC at $12.33 billion, highlighting significant institutional interest.

Will This Distribute Impact Bitcoin's Rally?

Analyzing the situation, sources like AMBCrypto have indicated that Bitcoin faces notable pressure from the excess supply created by long-term holder sales. This has left the cryptocurrency struggling to break free from its consolidation phase, unable to reclaim its all-time high of $123,000.

Despite this, the strong institutional demand is acting as a buffer, absorbing the selling pressure. Given the current landscape, while the distribution trend might not fully halt the rally, it could slow its pace.

However, if long-term holders ease their selling, Bitcoin could gain enough strength to retest its previous all-time highs and potentially surge even higher. Conversely, maintaining the current trend may lead to further consolidation within the $115,000 to $120,000 range.