Speculators lost nearly 90% of their Bitcoin (BTC) holdings after the “flash crash” to $26,000, new research shows.
In the latest edition of its weekly newsletter, “A Week on Chain,” analyst firm Glassnode reveal The true cost of last week’s bitcoin price drop for newbies.
Short-term holders are ‘increasingly sensitive’ to Bitcoin price
While BTC/USD is only down around 10%, the weekend’s drop has upended market sentiment.
With BTC price predictions centered around $25,000 and lower, the dust is settling on a trading environment accustomed to months of sideways behavior.
Arguably, this is most evident among short-term holders (STH), the more speculative end of the spectrum of holders.
Glassnode defines STH as an entity that holds BTC for no more than 155 days. Its counterpart is the Long Term Holder (LTH), more broadly known as the classic “Holder”.
“Of the 2.56 million BTC held by STH, only 300,000 BTC (11.7%) are still profitable,” the study noted.
As Cointelegraph reported, the overall share of BTC supply held by STH is at multi-year lows. That said, the past week has dramatically reshaped the profitability of the group, which previously served as a framework for BTC’s trading range.
STH’s total break-even point (i.e. realized price) is currently above $28,500.
Glassnode predictably warns that this group is becoming increasingly “sensitive” to market movements by analyzing the proportion of foreign exchange inflows originating in STH entities as a percentage of profit and loss.
“As the 2023 rally progresses, we could see a steady decline in profit dominance as more and more STH buy tokens with increasingly higher cost bases,” the report reads.
“This week we saw the largest loss-led reading since the March sell-off at $19,800. This suggests that the holdings of the STH group are largely underwater and increasingly price-sensitive.”
Experienced Holders Share of Bitcoin Supply Reaches New Highs
In contrast, the LTH investor base has yet to show any noticeable reaction to a return to $26,000 and below.
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Glassnode confirmed: “If we look at the reaction of long-term holders (LTH), we see that there is hardly any reaction.”
“The LTH group did not significantly increase volume sent to exchanges, and their total balance actually rose to a new ATH this week.”
An accompanying chart showing the inflow of LTH transactions described it as “negligible.”
“Long-term holders remain largely poised and unresponsive, a pattern typical of this group during a bear market hangover,” concluded Week on Chain.
“However, there is greater interest from short-term holders, who currently hold 88.3% of the supply (2.26 million BTC) in unrealized losses. As realized losses are accelerated to exchanges, and key technical shifts This is further complicated by the loss of average support, which puts the bulls at a disadvantage.”
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This article does not contain investment advice or recommendations. Every investment and transaction involves risk, and readers should do their own research when making a decision.
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