Benjamin Cowen’s recent insights into Bitcoin’s market behavior, particularly the HODL waves concept, offer a profound look at how different holders impact price movements. The CoinSpeech team has distilled the highlights for those seeking to understand these complex dynamics. You can find Benjamin Cowen’s new video below.
Understanding HODL Waves
The HODL waves concept categorizes Bitcoin holders into two main groups: long-term holders and short-term holders. According to Cowen, “The percentage of short-term holders increases during mania phases or market cycle tops.” This indicates that veteran Bitcoin investors tend to sell as the price surges, passing their coins to new, less experienced investors who often buy during high volatility periods.
Market Cycle Peaks
Cowen highlights key historical peaks, noting how the behavior of short-term and long-term holders shapes these moments. “We had these peaks in 2013, 2017, and 2021,” Cowen explains. Interestingly, he points out that “the second top in 2021 didn’t really see a surge of new retail interest,” indicating that the market dynamics were different compared to previous cycles.
Model Limitations
Cowen emphasizes that no model can predict market behavior with absolute certainty. He states, “All models are wrong; some are useful.” This underscores the notion that while models like the HODL waves can provide insights, they are not infallible. Price action, as Cowen notes, is ultimately king. “Price action is king; that matters more to me than what any indicator says.”
Onchain Data Perspectives
Throughout his analysis, Cowen reflects on the use of onchain data—a tool that has both benefits and pitfalls. He mentions, “Throughout all 2021, so many people were just posting all these onchain indicators and saying that they’re just nothing but bullish.” To counteract biases, Cowen and his team developed social risk indicators that normalize performance across different onchain charts, providing a more grounded assessment.
Behavior Post-Halving
The HODL waves analysis also sheds light on behavior post-halving events. Cowen notes a distinct pattern: “Long-term holders tend to sell into parabolic rallies, and HODL waves for these go down, then rise again as the market cools.” This cyclical behavior highlights the strategic movements of experienced holders during market volatility.
Future Outlook
Looking ahead, Cowen discusses how these patterns might evolve based on historical trends. He observes, “From this cycle to this cycle, it was a higher low, so maybe this one will be a higher low as well.” However, he cautions that connecting the dots is often easier in hindsight, leaving a degree of uncertainty about future movements.