The violent sell-off last week spurred by the deleveraging event has taken a serious toll on short-term Bitcoin holders making for the largest single-day down move YTD. This subsequently pushed prices below the ‘Short-Term Holder’ cost basis. Recent data suggest that a significant portion of the short-term holder supply is currently being held at an unrealized loss.
According to Glassnode, the short-term holder cost basis is an on-chain price model which has historically offered support during robust uptrends. Its latest analysis revealed that the Realized Price and the Long-Term Holder cost basis, both trading noticeably below, places the market in a somewhat “precarious” from a psychological standpoint.
Bitcoin Bulls on the Back-Foot
Bitcoin fell close to $26k as turmoil gripped the market and was still down by over 10%. While long-term holders remained largely unfazed and unresponsive, a typical trait during bear market recovery periods, the same cannot be said for the short-term holders’ cohort.
Short-term holders are essentially entities that do not hold coins for more than 155 days and are the most reactive group of traders to market volatility. As a result, over 88.3% of the supply controlled by short-term holders is currently underwater. Glassnode stated that out of the 2.56 million BTC held by this cohort, only 300k, representing only 11.7%, is still in profit.
There has been a consistent decline in profit dominance as the 2023 rally progressed. It was also found that more short-term holders acquired coins with an increasingly elevated cost basis.
The blockchain intelligence platform noted,
“This week we saw the largest loss dominance reading since the March sell-off to $19.8k. This suggests that the STH cohort are both largely underwater on their holdings, and increasingly price sensitive.”
More Downside?
While the 2022 bear market appears to be heading for the conclusion, Bitcoin’s latest dump has prompted certain analysts to speculate more lows for the flagship crypto-asset that can drag the price down to $12.5k.
Monitoring resource Material Indicators said that the Bitcoin market currently is at the stage which “feels like a game of chicken to see who is going to make a move to break the chop.” Another prominent trader, Jelle, described Bitcoin’s intraday movements as the “death chop.”
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