Now the question is, assuming everyone who ever bough bitcoin is holding their bitcoin in their private wallets, what will be the fate of bitcoin and the bitcoin network? Does holding bitcoin strengthen the bitcoin network? If no, are those who sell and more their bitcoin on-chain generally doing bitcoin bad?
You holding bitcoin is not adding any impact in the market price, but before you started holding you bought bitcoin and that buying order in correlation with other buyers create a significant impact in the market chart. However the market price is influenced by several factors of which one of the greatest is buying and selling bitcoin. If everyone decides to hold their bitcoins, no transaction, no buying no selling, it would affect every part of the network both mining and the price is likely to drop rather than appreciating. The little moves we see in the chart every second, minute, hours, days.... is as a result of the orders going on in the market not because people are holding their bitcoin, holding tends to favour the holder and not the network, it's buy and sell that matters most.
If everyone withdraws their Bitcoins from cryptocurrency exchanges and keeps them in their non-custodial or hardware wallets, this could trigger a rise in the price of Bitcoin. After all, when demand is stable and supply is limited, this should theoretically push the price up. In reality, however, things are a little different. A huge number of bots operate on centralized cryptocurrency exchanges, which draw price charts. There are significantly fewer real user orders. Large transactions are conducted on OTC. Therefore, the price depends more on large players, such as market makers and cryptocurrency exchanges, which in turn can manipulate the price of Bitcoin. Orders from ordinary users, if they have any influence at all, are insignificant.