- 88.3% of short-term BTC holders’ supply was held at an unrealized loss following last week’s drop in value.
- The price of BTC threatens to fall further as short-term holders intensify coin distribution.
Last week’s deleveraging event in Bitcoins [BTC] the futures markets caused the king coin to record its most important sell-off on one day of the year. As investors count their losses, short-term holders can face a bleak future as 88.3% of short-term holders’ supply was held at an unrealized loss. Glass node found in a new report.
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Short-term bonds were the most exposed
According to the on-chain data provider, a large percentage of BTC’s supply that was previously profitable fell sharply last week. This suggested that a significant number of investors who bought the leading cryptocurrency at high prices ended up in losses.
Glassnode believed this was due to a “top-heavy market.” This refers to a market situation where many investors buy BTC at a price close to or above the current price. This means that these investors would be in an unrealized loss position if the value of the coin fell.
Source: Glassnode
Glassnode noted that this behavior was common among BTC short-term holders and found that:
“Sharp increases in STH supply in loss typically follow the ‘top heavy markets’ such as May 2021, December 2021 and again this week.”
“Of the 2.56 million BTC held by STHs, only 300,000 BTC (11.7%) is still profitable,” added Glassnode.
Source: Glassnode
Furthermore, Glassnode has assessed the profit or loss bias (dominance) of STH volumes flowing to the exchanges and found that the profit dominance of the STH volumes flowing to the exchanges has been steadily decreasing since the value of BTC started its upward trend in January began.
This is because many investors who are part of the STH cohort of BTC holders have continued to purchase the coin at an “increasing cost.”
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Because last week was no different:
“We saw the biggest loss dominance since the March sell-off to $19.8k. This suggests that the STH cohort is largely under water in terms of their assets and is becoming increasingly price sensitive.”
This tells us that the current BTC market is becoming top heavy. Since STHs are prone to more losses as they continue to buy at the top, the price of BTC may struggle to grow in the meantime.
Glassnode pointed out that last week’s price drop was “one to watch closely” and found that loss momentum and dominance among BTC short-term holders has surged. When this happened in May and December 2021, it was followed by “more violent downward trends” in BTC’s value.
Source: Glassnode