When analyzing the Bitcoin market, it’s equally important to understand the behavior of different market participants as it is to understand the technical foundations of Bitcoin’s price movement. On-chain analysis frequently analyzes short– and long-term holders, as their behavior is inherently different. However, Bitcoin’s maturity enables us to differentiate between large and small entities, as hundreds of institutions have populated the space and become a dominant force in the market. 

Large entities tend to make strategic moves based on long-term outlooks and substantial market analysis. In contrast, small entities, typically retail investors, are more reactive and driven by short-term speculation and sentiment. 

The relative activity of small and large entities is an excellent metric for distinguishing between these two cohorts. Although relying solely on this metric has limitations — such as oversimplifying the complex behavior of a diverse range of investors — it still offers a straightforward, binary check of market conditions. Glassnode’s metric differentiates between the median transaction volumes of small entities and the mean transaction volumes of large entities to reveal trends that suggest potential shifts in the market.

Since May 3, the activity levels of small entities, represented by the median transaction volumes, have consistently outpaced those of large entities. 

The skewness in transaction volumes, where the average transaction size (mean) is larger than the typical transaction size (median), indicates that many small transactions happen frequently. This pattern is typical in Bitcoin markets and shows strong involvement from retail investors, who generally make smaller trades. When the activity of small entities is higher than that of large entities, it usually means the market is driven by retail investors’ excitement and speculation, often seen at the beginning of a bull market. On the other hand, if this activity decreases, it can suggest that retail interest is fading and the market might be stabilizing or consolidating.

On May 18, the median transaction volume of small entities reached a peak activity ratio of 3.194, while the mean transaction volume of large entities was at 1.916. This divergence shows a much larger base of smaller transactions, indicating increased demand and speculative activity among retail investors. 

The continuous increase in small entities’ activity, especially during significant price volatility, such as the peak of $71,400 on May 20, shows significant retail enthusiasm. Retail-driven demand like this can often increase market volatility, as smaller investors react more swiftly to market changes than large institutional players. Glassnode’s data for May 26 further confirms this trend, with small entities maintaining a high activity ratio of 2.969 compared to large entities’ 2.127, despite a price correction to $68,500. 

Given that this is the first time small entities’ activity has outpaced large entities since October 2023, it’s safe to say that the market has become increasingly bullish.

The increased activity among small entities indicates strong grassroots support for Bitcoin’s price movements, which could sustain upward momentum in the short to medium term. A decrease in activity from large entities during this time would be a warning sign, as markets driven solely by retail speculation are incredibly unstable and prone to volatility. 

However, there has also been a continuous increase in large entity activity. The influx of large investors into the space, driven largely by the popularity and accessibility of spot Bitcoin ETFs in the US, has kept activity consistently high. The fact that small entities had a higher rate of activity during the past month shows that most of the volatility came from retail, while foundational growth was fueled by institutions. 

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Tracking the changes in the supply held by entities with various Bitcoin balances provides insight into investor behavior and potential price movements. Each category of holder—from individual retail investors to large institutions—plays a distinct role in the crypto ecosystem, and their collective actions can significantly influence the overall market.

Changes in the supply distribution among different wallet sizes can be a strong indicator of market sentiment. For instance, small entities accumulating BTC often suggests increased retail interest and possibly a bullish sentiment among individual investors who may view current prices as attractive for entry or investment expansion. Redistribution by larger entities could represent various strategies or responses to the market, including profit-taking, portfolio rebalancing, or reactions to regulatory or economic changes. This activity is crucial as it might represent institutional or experienced investors’ perspectives, which can be a bellwether for broader market moves.

The concentration of Bitcoin in large wallets, or its dispersal across a broader range of smaller holders, affects the liquidity and volatility of the market. A high concentration in a few wallets can lead to increased volatility if these entities decide to move large portions of their holdings. Conversely, a more distributed base of small and medium holders can enhance market stability and liquidity, as sales or purchases are less likely to impact the price drastically.

Understanding which market segments are growing or shrinking can provide insights into how external factors impact different types of investors.

Data from Glassnode showed an increase in the supply of Bitcoin held across all categories of smaller entities, ranging from entities with a balance of less than 0.0001 BTC to balances up to 10 BTC. Entities with a balance between 0.01 – 0.1 BTC saw the largest increase in their Bitcoin holdings. This group’s supply increased from 254,503.7 BTC to 261,281.4 BTC. It represents an increase of 6,777.7 BTC, the highest absolute increase among the smaller entity groups observed over the past 30 days.

This significant increase could indicate a growing confidence among what might be considered “casual” investors—individuals who are not just dipping their toes in the Bitcoin market but are potentially using it as a minor yet meaningful component of their crypto holdings. The increase across all of these entities indicates they are accumulating. With Bitcoin’s price dropping from $73,000 to $63,000 over the past month, the timing supports the notion that these investors are buying the dip, likely viewing lower prices as an attractive entry point. This behavior is characteristic of retail investors and smaller market participants who may perceive long-term value at lower price points.

Conversely, larger entities showed mixed changes in their balances, with most showing decreases over the past 30 days. 

The reduction in holdings among the largest entities could be attributed to several factors, including the selling pressures from ETF outflows, notably from products like GBTC, and miners selling their holdings to realize profits or cover operational costs amidst a lower-price environment. The movement in large balances aligns with institutional behavior, where adjustments in holdings can be strategic or a response to market conditions.

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