Recent on-chain data reveals a continued decline in Bitcoin's long-term holder supply. This trend is a bit scary, at least for those who still bet high on the next BTC rally in the near future.

Long-term holders (LTHs) are investors who have held Bitcoin for over 155 days. They are typically considered the market's most resilient participants, the ones you can count on mostly when it comes to seeking bullish price support levels.

Short-term holders (STHs), in contrast, represent more volatile investors.

The LTH supply has been decreasing since January's spot ETF approvals.

Data shows the sharpest decline occurred during Bitcoin's rally to new price highs. This suggests even long-term investors were tempted to take profits. Simply put, getting the profit out in fiat was so tempting, thet it clearly over-weighted the potential even bigger incomes in the future.

The supply continues to decrease, albeit more slowly, despite recent bearish price action. This ongoing trend is noteworthy.

Interestingly, the decline persists beyond the 155-day mark since the spot ETF launch. New buying appears outweighed by selling from established holders.

CryptoQuant analyst Axel Adler Jr suggests this could indicate market-wide pessimism. However, historical data provides context.

Similar LTH supply reductions occurred mid-cycle in previous bull runs. This pattern doesn't necessarily signal long-term bearish sentiment.

"The timing of the selloff would indicate that these profits had ballooned so much during the rally that even these diamond hands gave into the allure of profit-taking," Adler noted.