Analyzing STH & LTH Behavior
Bear Market Bottom: Momentum and Capitulation
Dear Bitcoiners,
This week, I have some great new on-chain insights for you! One of the major strengths of on-chain analysis is that, because we have access to the age of coins, we can separate investor behavior into Short-Term Holder and Long-Term Holder cohorts.
We often focus on Short-Term Holder (STH) behavior, as it is generally more responsive to price action. However, especially during bear market bottom formations, Long-Term Holders (LTH) are affected as well. Mapping the cyclical behavior of both cohorts therefore provides extremely meaningful insights.
We can analyze and compare both cohorts through:
Cost Basis: Historically, during bear market bottom formations, the STH cost basis briefly falls below the LTH cost basis.
Momentum: This measures how recent cost basis changes compare with their historical averages.
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In this newsletter, we’ll use these methods to better understand the ongoing dynamics of the bottom formation.
👉 Key insight: While still negative, STH Momentum has formed higher lows and appears to be moving toward positive territory. It may still take some time, but a sustained move back above zero has historically confirmed a return to bull market conditions.
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Next, we’ll combine STH and LTH momentum which allows us to identify capitulation zones during bear market bottom formations. We also use the ratio between the STH and LTH cost basis to map their cyclical relationship. Both methods provide important insights into the current bottom formation. As always, I’ll provide access to the live charts, so you can track these developments yourself.
