Deciphering the HODL Wave: A Glimpse into the World of Long-Term Cryptocurrency Holders
The “HODL Wave” is a term commonly used in the cryptocurrency community to analyze the behavior of long-term holders (HODLers) of a particular cryptocurrency over time. It provides insights into the movement of coins held by these investors and can offer valuable information about market sentiment and potential price trends. Here’s a breakdown of the HODL Wave concept:
Definition: The HODL Wave is a visual representation of the distribution of cryptocurrency holdings based on the length of time those coins have been held without being moved. It essentially categorizes coins into different “waves” or groups, each representing a specific range of holding periods.
Understanding the Waves:
Wave 1: Coins that have been held for a very short period, typically days or weeks.
Wave 2: Coins that have been held for several months but less than a year.
Wave 3: Coins that have been held for one to two years.
Wave 4: Coins that have been held for two to five years.
Wave 5: Coins that have been held for more than five years.
Analysis and Implications:
By analyzing the HODL Wave, cryptocurrency enthusiasts and analysts can gain insights into the behavior of long-term holders. For example, if a significant portion of the coins is in the “Wave 4” or “Wave 5” categories, it may suggest that many investors have a long-term bullish outlook on the cryptocurrency.
Conversely, if there is a shift in coins from the long-term holding categories (Wave 4 and Wave 5) to shorter-term categories (Wave 1 and Wave 2), it could indicate increased selling pressure and a potential bearish sentiment.
Market Sentiment: Changes in the HODL Wave can reflect shifts in market sentiment. When more coins move from long-term holding categories to short-term ones, it may suggest that investors are becoming more active and potentially taking profits.
Price Predictions: Some analysts use the HODL Wave data to make price predictions. For example, if a large portion of the supply is in long-term holding categories, it may be seen as a bullish signal because these holders are less likely to sell their coins in response to short-term price fluctuations.
Data Sources: HODL Wave data can be derived from blockchain explorers and on-chain analysis tools. It requires tracking the age of coins and categorizing them based on predefined time periods.
Limitations: It’s important to note that the HODL Wave is just one of many metrics used to analyze cryptocurrency markets. It provides a snapshot of the behavior of long-term holders but doesn’t capture all market dynamics. Additionally, market sentiment can change rapidly, and investors’ decisions are influenced by a wide range of factors.
In the following graph, we will observe the entry zone of the new wave, which begins in 2022 (mistakenly, many people think that bitcoin is still in crypto winter, when in my opinion, we are already in crypto spring and it is making a large zone of accumulation, with lower zones in November 2022, which is where the new hold zone for bitcoin begins).
The bitcoin 1YR HODL Wave
The “1YR HODL Wave” refers to the distribution of bitcoin holders based on how long they have held their coins, specifically focusing on those who have held their bitcoin for one year or more.
In other words:
The 1-YR HODL Wave stat represents the percentage or proportion of bitcoin addresses (or wallets) that have held their Bitcoin for at least one year without conducting any outgoing transactions. It gives insights into the behavior of long-term holders who are willing to keep their bitcoin investments for an extended period, rather than engaging in short-term trading or frequent buying and selling.
This metric is often used by analysts and investors to gauge the level of confidence and conviction in the Bitcoin market. A higher percentage of long-term hodlers could be interpreted as a sign of strong faith in the long-term potential of bitcoin as an asset.
Conversely, a decrease in the 1-year hodl wave could indicate increased selling activity and potential short-term market sentiment.
In the following graph, the “hunt” of the November 2022 area is observed, as the beginning of the 2022 hold and which should extend for approximately two and a half years (perhaps between May and August 2025, as the maximum point of this hold time for bitcoin)
My words should not be taken as certain science, but rather it is my market vision, analyzing all types of onchain metrics, including even waves, as read in this article, which we published in September 2023. Time, as always, will give and take away reasons, but this is not the real objective of the article, but rather information, and the adoption of knowledge, around the exciting world of decentralized finance, crypto and all the underlying technology.
It is not a recommendation, please consult your financial advisor before making any type of investment, if you are not a qualified investor.
Nice Saturday !