Bitcoin (BTC) Faces Deep Correction, Short-Term Holders in Loss

Bitcoin
has
encountered
its
most
substantial
correction
since
late
2022,
trading
below
the
200-day
moving
average
(200DMA)
and
placing
a
significant
number
of
Short-Term
Holders
in
an
unrealized
loss,
according
to
Glassnode
Insights.

Price
Performance

In
the
2023-24
cycle,
Bitcoin’s
price
action
has
shown
both
similarities
and
differences
compared
to
previous
cycles.
Following
the
collapse
of
FTX,
the
market
saw
roughly
18
months
of
steady
price
appreciation.
This
was
succeeded
by
three
months
of
range-bound
trading
after
reaching
a
$73,000
high
due
to
ETF
optimism.
Between
May
and
July,
Bitcoin
experienced
a
drawdown
exceeding
26%
from
its
all-time
high
(ATH).

Despite
this
downturn,
the
correction
is
notably
shallower
than
in
past
cycles,
indicating
a
robust
underlying
market
structure
and
reduced
volatility
as
Bitcoin
matures
as
an
asset
class.

New
Investors
Underwater

The
volume
of
supply
held
by
Short-Term
Holders
has
grown
significantly
since
January
2024,
driven
by
explosive
price
action
following
the
launch
of
spot
ETFs.
However,
recent
months
have
seen
this
demand
profile
plateau,
leading
to
a
supply
overhang
as
fewer
Long-Term
Holders
take
profits
and
fewer
new
buyers
step
in.

During
sustained
bull
markets,
local
bottoms
typically
form
when
the
volume
of
Short-Term
Holder
supply
in
loss
saturates
around
1-2
million
BTC.
In
more
severe
cases,
this
can
peak
between
2-3
million
BTC.
The
recent
sell-off
to
the
$53,000
level
pushed
the
volume
of
coins
held
below
their
cost
basis
to
over
2.8
million
BTC,
marking
the
second
such
occurrence
in
the
past
12
months.

A
Halt
On
Profitability

As
spot
prices
contract,
the
ratio
between
investor
Realized
Profit
and
Realized
Loss
has
declined,
now
sitting
in
the
0.50
to
0.75
range.
This
is
a
neutral
level
typically
seen
during
bull
market
corrections.
Sharp
fluctuations
in
this
metric
have
also
been
observed
throughout
the
2019-2022
cycle,
reflecting
inherent
instability
and
investor
uncertainty.

This
week,
Short-Term
Holders
realized
a
total
loss
of
approximately
$595
million,
the
largest
since
the
2022
cycle
low.
Despite
the
severity
in
dollar
terms,
the
losses
are
relatively
typical
compared
to
previous
bull
market
corrections
when
denominated
as
a
percentage
of
total
invested
wealth.

Summary
and
Conclusion

Following
18
months
of
upward
price
action
post-FTX
collapse
and
three
months
of
sideways
trading,
the
market
has
experienced
its
deepest
correction
of
the
current
cycle.
Nonetheless,
the
drawdown
remains
favorable
compared
to
historical
cycles,
suggesting
a
relatively
robust
market
structure.

The
aggressive
contraction
has
put
a
significant
number
of
Short-Term
Holders
in
severe
unrealized
loss,
exerting
pressure
on
this
cohort.
However,
the
magnitude
of
losses
remains
subdued
relative
to
the
market
size.
Long-Term
Holders
have
largely
avoided
taking
losses,
indicating
that
mature
investors
remain
profitable
despite
market
turbulence.

Disclaimer:
This
report
does
not
provide
any
investment
advice.
All
data
is
provided
for
informational
and
educational
purposes
only.
No
investment
decision
should
be
based
on
the
information
provided
here,
and
you
are
solely
responsible
for
your
own
investment
decisions.

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