Posted:
- BTC’s decline from the $44,000 price level was due to the short-term holders.
- Demand for BTC worsened as the price fell by almost 10% over the past week.
Bitcoins [BTC] Upside momentum above the $44,000 price hit a wall last week, signaling a possible shift in investor sentiment, especially the coin’s short-term holders (STHs), Glassnode found in a new report.
The short term holders are to blame
The on-chain data provider assessed the coin’s STH-Supply Profit/Loss ratio. This metric, which measures how much profit or loss BTC STHs are making, helps spot when these investors are fearful (selling too much) or greedy (buying too much).
Historically, a P/E ratio above 20 indicates overheating, below 0.05 indicates oversold conditions, and around 1.0 indicates a breakeven point.
When the market rally started in October, the STH-Supply Profit/Loss Ratio rose above 20,
“This indicates a higher risk structure and a similar ‘overheated’ condition as the NTV-Premium indicator.”
When overheated market conditions pushed the price of BTC above $44,000, it triggered a wave of profit-taking among investors who had held the coin for less than six months.
Glassnode stated:
“This week’s rally to $44.2k produced a high level of STH profit-taking activity, suggesting this cohort was trading on their paper profits and taking advantage of demand liquidity.”
Source: Glassnode
Furthermore, Glassnode added that during periods of significant market sell-offs, BTC STHs tend to experience significant losses.
“This signals when investors panic and send recently acquired coins back to exchanges to remove them at a loss.”
It indicates increased distress and reactive selling behavior among investors during significant market downturns.
Based on the combined insights of BTC’s STH-Supply Profit/Loss Ratio, NTV-Premium indicators and the Realized Profit/Loss Ratio, Glassnode concluded:
“As we can see, the recent rally to $44.2k was accompanied by a statistically meaningful amount of profit taking by STHs… We can see a confluence of factors that indicate that potential saturation of demand (exhaustion) may be at play .”
Source: Glassnode
Read Bitcoin’s [BTC] Price forecast 2023-24
The current design of BTC
At the time of writing, the leading coin was exchanging hands at $41,162. According to data from BTC, the value of BTC has fallen by almost 10% in the past week CoinMarketCap.
Trading activity on a 12-hour chart showed that the key momentum indicators had fallen below their respective center lines at the time of writing. This suggested that BTC accumulation was declining while the coin sell-off was gaining momentum.
Source: BTC/USDT on TradingView