Bitcoin Short-Term Holders Contribute to BTC’s Decline Below $50K

Recent analysis indicates that short-term holders of Bitcoin have significantly felt the impact of the cryptocurrency’s price plunge beneath the $50,000 mark.

The Price Crash and Its Implications

On August 5, Bitcoin experienced a sharp decline of over 15%, reaching a six-month low of $49,050. Analysts suggest that this downturn was largely an “overreaction” from the short-term holders.

As of August 20, with Bitcoin valued at approximately $58,800, the average short-term holder—who possesses Bitcoin for less than 155 days—has encountered significant “unrealized losses,” according to a report from Glassnode.

Who Are the Short-Term Holders?

This group primarily comprises individuals who purchased Bitcoin during the 2024 market rally, when it peaked at $73,835 on March 14.

• Short-term holders have absorbed most of the losses during the recent price declines.
• The market value to realized value (MVRV) ratio for these holders has dipped below the equilibrium level of 1.0, indicating they have suffered the worst of the recent declines.

Risks of Extended Losses

While fluctuations are standard during bullish periods, a prolonged stay below the equilibrium value might provoke panic among investors, potentially setting off a more pronounced bear market.

According to analysts, extended periods where STH-MVRV remains below 1.0 could heighten investor anxiety, leading to a more severe downturn.

Market Reactions and Overreactions

Glassnode theorizes that the recent price drop is primarily driven by newer investors, who currently find themselves facing significant unrealized losses.

The analysts examined the difference between the spent STH-cost basis and the holding cost basis, revealing only a slight deviation, suggesting a minor overreaction when the market dipped below $50,000.

Current Market Conditions

As long as Bitcoin remains under $59,000, particularly below the 200-day exponential moving average (EMA), short-term holders will continue to face losses.

Despite its approach to this EMA, Bitcoin is currently struggling to regain solid footing above $59,000.

According to data from Cointelegraph Markets Pro and TradingView, Bitcoin’s price crossed the 200-day EMA on August 20 but failed to maintain its position, retreating towards $58,700.

Factors Influencing Bitcoin’s Performance

Several issues may be affecting Bitcoin’s current performance, including:

• Outflows from spot Bitcoin ETFs
• Decreasing profitability among Bitcoin miners
• Concerns regarding potential negative macroeconomic developments

Additionally, the upcoming release of US weekly jobless claims and the flash Purchasing Managers’ Index (PMI) for August, expected on August 23, may significantly influence Bitcoin’s trajectory. Optimistic results could bolster Bitcoin’s recovery and assist it in reclaiming the 200-day EMA.

Investors should note that this content is not intended as investment advice. All investment and trading decisions carry risks, and readers should undertake their own research before proceeding.