The price of the largest cryptocurrency, Bitcoin, continues to remain under selling pressure (BTC), and on-chain data shows that short-term Bitcoin investors, who tend to be sensitive to short-term price movements, are largely in loss after the recent price drop.
Short-Term Bitcoin Investors Face Heavy Losses
Bitcoin, the largest cryptocurrency by market value, recorded its worst performance since November 2022, dropping below $26,000 with a decrease of over 10% last week. According to the data tracked by on-chain data analysis platform Glassnode, 88.3% of the BTC held by short-term investors or investors who control wallet addresses that have not held BTC for more than 155 days is unrealized losses. In other words, about 2.26 million out of the 2.56 million BTC held by short-term investors (worth $66.5 billion) have a higher purchase cost than the market price.
In its weekly bulletin published on August 21, Glassnode noted, “Sharp increases in unrealized STH supply losses tend to follow ‘most intense market days’ such as May 2021, December 2021, and this week. Of the 2.56 million BTC held by STH, only 300,000 BTC (11.7% of these BTC) are still profitable.”
A weak market can make it difficult to profit due to the selling pressure caused by losing short-term investors. Indeed, this is the current trend in the market. According to Glassnode, the flow of BTC belonging to STH with purchase costs higher than the market rate to cryptocurrency exchanges, or the STH volume flowing into cryptocurrency exchanges, has increased in recent times.
Investors usually transfer their assets from personal wallets to cryptocurrency exchange wallets when they want to liquidate their positions or use them as margin in derivative transactions. Glassnode commented on this situation, saying, “This week saw the largest dominance of loss in the STH in relation to the sell-off at the $19,800 level in March. This indicates that STHs are both largely in loss and becoming increasingly sensitive to prices.”
Presents a Danger for the Cryptocurrency Market
Ilan Solot, Co-President of Digital Assets at Marex Solutions, said that the unrealized losses of short-term Bitcoin investors are currently a critical issue for the market. Solot stated, “The real issue here is the fragile market outlook for BTC, as short-term investors are currently in loss both in terms of price and narrative.”
Solot highlighted that the narrative of a spot Bitcoin ETF still has a chance of obtaining approval from the U.S. Securities and Exchange Commission (SEC) amid rising bond yields and tighter liquidity conditions, but he added that this positive decision has been continuously postponed. He added, “Almost 90% of short-term investors (<155 days) are experiencing unrealized losses, which is often associated with selling pressure.”
