The sharp decline in the price of Bitcoin (BTC), the world’s largest cryptocurrency, has significantly impacted short-term holders. Recent reports indicate that many of these BTC holders are now experiencing substantial financial losses due to the cryptocurrency’s price crash and ongoing market volatility.
Short-Term Holders Under Pressure
On September 4, Glassnode, an on-chain market intelligence platform, released a comprehensive report detailing the financial strain that short-term Bitcoin holders are currently experiencing. This strain is largely due to rising market volatility and declines in the price of BTC.
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Currently, short-term holders are holding Bitcoin at a significant loss, posing a potential risk to the market. Despite broader market unrealized losses being historically low at just 2.9% of BTC’s total market capitalization, short-term holders are feeling the most pressure. The ratio between total Unrealized Profit is six times larger than Unrealized Loss, indicating that the aggregate investor remains relatively profitable even amidst market declines.
Nevertheless, short-term BTC holders who recently purchased Bitcoin are bearing the brunt of these market declines. Their unrealized losses are significantly higher and continue to grow, although the situation has not yet reached full bear market conditions similar to previous crashes. The current losses resemble a more turbulent period, akin to the market environment in 2019.
These observations are based on evaluations of the Short Term Holder Market Value To Realized Value ratio (STH MVRV). According to Glassnode, the STH MVRV of Bitcoin has fallen below the breakeven value of 1.0, currently trading at levels similar to August 2023, when the market was recovering from the FTX failure. This suggests that the average new BTC investor is holding an unrealized loss. Until Bitcoin’s price surpasses the $62,400 mark, further weaknesses in the declining market are anticipated.
At present, all age bands and segments within the short-term holder group are experiencing unrealized losses, indicating widespread stress among short-term Bitcoin investors in the crypto market.
Current State Of The Bitcoin Market
Glassnode’s report provides a deep analysis of the current state of the Bitcoin market, particularly focusing on price movements, investor sentiment, and overall market behavior. Over the past six months, Bitcoin’s price action has been relatively flat, resulting in numerous investors showing indifference or becoming apathetic.
In the last three months, however, the market has experienced increased downward pressure, leading to a significant price drawdown in BTC. Despite this, the decline is relatively smaller compared to historical bear markets.
Glassnode revealed that Realized Profit has dramatically decreased since Bitcoin’s all-time high of over $73,000 in March 2024. This indicates that fewer Bitcoins are being sold at a profit while Realized Losses continue to rise as the market dwindles.
Bitcoin’s current Sell-Side Risk Ratio is also very low, suggesting that most assets being traded are close to their breakeven cost. This implies that the current market could be overly saturated in terms of profit and loss-taking, hinting at the possibility of more volatility in the future.
As the market continues to evolve, investors must remain vigilant and informed about the ongoing trends and potential risks. The current state of the Bitcoin market serves as a reminder of the inherent volatility and the need for strategic investment decisions.
