Bitcoin (BTC) is in a “transition,” which should pave the way to the next bull market top, new research has concluded.

In the latest edition of its weekly newsletter, “The Week On-Chain,” analytics firm Glassnode unveiled its latest tool for tracking Bitcoin’s resurgence.

Bitcoin hodlers in “transition”

After the 2022 bear market and signs of recovery in Q1 this year, on-chain metrics have undergone a broad transformation, many suggesting that a long-term BTC price bottom is already in.

With price action stagnating since mid-March, however, doubts have returned — along with downside targets which stretch toward $20,000.

For Glassnode analysts, however, Bitcoin’s long-term investor base is already preparing for better times ahead.

Using existing on-chain tools, analysts unveiled a new way of tracking sentiment among these long-term holders (LTHs) — those hodling BTC for at least 155 days.

The tool, “Long Term Holder Spending & Profitability,” splits LTH behavior patterns into four phases.

After a period of “capitulation” at the end of 2022, LTHs have begun a “transition” toward a state of “equilibrium” before full “euphoria” — the next BTC price cycle top — hits.

Capitulation is defined as a situation in which “Spot price is lower than the LTH cost basis,” Glassnode explains, with significant LTH spending thus “likely due to financial pressure and capitulation.”

Transition, meanwhile, is when the “Market is trading slightly above the long-term holders cost basis, and occasional light spending is part of day-to-day trade.”

The LTH cost basis, as of May 30, lies at around $20,800, separate data shows.

“Our current market has recently reached the Transition phase, flagging a local uptick in LTH spending this week,” “The Week On-Chain” commented.

“Depending on what direction volatility erupts next, we can employ this tool to locate local periods of overheated conditions, as observed from the lens of Long-Term Holders.”

“Seeking equilibrium” — but for how long?

Complementing LTHs, Bitcoin’s short-term holder (STH) cohort, which corresponds to more speculative investors, is already on the radar.

Related: Bitcoin risks ‘new lows’ into monthly close as BTC price retests $27K

Speculative activity has increased in 2023, Glassnode previously stated, making their cost basis — at around $26,000 — an increasingly important level.

Overall, however, BTC/USD remains in a narrow range, having acted within a $5,000 corridor for almost three months, data from Cointelegraph Markets Pro and TradingView shows.

“The digital asset market continues to outperform major commodities in 2023, however all are currently experiencing a meaningful correction. Having recovered from the depths of the 2022 bear market, Bitcoin investors find themselves in a form of equilibrium, with little gravity in either direction,” the newsletter summarized.

“Given the extremely low volatility, and narrow trading ranges of late, it seems this equilibrium is soon to be disturbed.”

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.