What is the Proportion of Bitcoin Held by Short-Term Holders?

The proportion of Bitcoin held by short-term holders refers to the percentage of Bitcoin's total circulating supply owned by short-term holders (STH). These holders are typically defined as investors who have held Bitcoin for a shorter period (e.g., less than 6 months or 155 days, depending on the analysis tool), and they are more likely to trade or cash out during market fluctuations.

How It's Defined and Calculated

Short-Term Holders (STH): Identified using on-chain data by analyzing Bitcoin's UTXOs (unspent transaction outputs) and tracking the last time each coin moved. Coins moved within a set threshold (e.g., 155 days) are classified as belonging to short-term holders.

Proportion Calculation: The total Bitcoin held by short-term holders is divided by the current circulating supply, expressed as a percentage. For example, if the circulating supply is 19 million BTC and short-term holders own 1.9 million BTC, the proportion is 10%.

Why It Matters

Market Activity Indicator: A high STH proportion often signals active trading, new capital inflows, or increased speculation.

Sell Pressure Risk: Short-term holders are more prone to sell during price swings, so a rising proportion may indicate growing short-term sell pressure, especially at high prices.

Cycle Signals: In bull markets, the STH proportion tends to rise as new investors enter; in bear markets, it may drop as speculators exit.

Relation to Other Indicators

MVRV Ratio: A high STH proportion alongside a high MVRV may suggest an overheated market.

RHODL Ratio: An increase in STH holdings boosts short-term RHODL bands (e.g., 1-week), potentially triggering a red-band signal.

Long-Term Holder Contrast: The STH proportion inversely correlates with the long-term holder (LTH) proportion, with their combined total nearing 100% (excluding lost Bitcoin).

How to Use It

A sharp rise in the STH proportion at bull market peaks may hint at an impending correction, signaling a time to sell or reduce exposure. A decline during bear market lows could indicate speculators leaving, offering a buying opportunity for long-term investors.

Tracking the proportion of Bitcoin held by short-term holders helps you assess market sentiment, speculative activity, and potential price turning points.