Short-term Bitcoin holders face heavy losses: What it means for BTC

• Short-term Bitcoin holders were heavily underwater per Glassnode, and they pose a significant risk to BTC if they choose to sell.
• However, loss-taking activities by these traders remain below bear market levels despite fear gripping the market.

Bitcoin [BTC] was down 22% from its all-time high above $73,000. The price decline has seen short-term Bitcoin holders, who bought during the early 2024 rally, sit on a substantial amount of unrealized losses. 

In its weekly onchain report, Glassnode noted that the Market Value to Realized Value (MVRV) ratio for short-term holders has dropped below the break even value of 1.0.

This indicates that the average new investor is yet to break even. 

This cohort will return to profitability once Bitcoin reclaims $62,400. BTC was trading at $56,785 at the time of writing, meaning that it has to gain by 9% for these traders to be back in profits.

Source: Glassnode

Short-term Bitcoin holders pose a risk to Bitcoin if they choose to sell to minimize their losses. Nevertheless, the unrealized losses have yet to mirror previous bear markets, and instead, show a choppy trend. 

Selling activity remains below bear market levels 

While some Bitcoin holders are sitting on unrealized losses, some are selling to minimize the downside risk. Per Glassnode, loss-taking events have increased significantly, with more traders dumping as soon as Bitcoin forms a higher low. 

However, these sales have yet to reach extreme levels seen during the 2021 and 2022 bear markets, despite the Bitcoin Fear and Greed Index at 29 showing a state of fear. 

Short-term selling behavior can also be seen in the Spent Output Profit Ratio (SOPR) on CryptoQuant. This metric is below 1 indicating that some traders are willing to sell at a loss.

However, the ratio has yet to drop to record lows, signaling that more traders are willing to hold BTC. 

Source: CryptoQuant

Long-term Bitcoin holders have also slowed down profit-taking activities. The supply of coins held by these traders has also increased significantly, a trend that usually precedes a transition to a bear market. 

Glassnode concludes that the decline in loss and profit-taking suggests saturation at current prices and the likelihood of volatility spiking soon. 

Bears continue to dominate BTC price 

Over the past six months, Bitcoin has been forming lower highs on the daily chart. Despite bouts of buying activity, bears continued to dominate the market. 

The Awesome Oscillator (AO) proved the bearish thesis after primarily being in the negative region since August. The AO histogram bars were also red, which is typically a sell signal as bearish conditions continued to prevail. 

The 20-day Exponential Moving Average (EMA) has converged with the 200-day EMA from above, which shows a weakening of the short-term momentum. 

Source: TradingView

The one-day chart also showed that BTC was rejected at the $58,530 resistance, indicating a lack of demand. BTC is now at risk of dropping to test resistance at around $54,900 or the 0.236 Fibonacci retracement level. 

BTC needs to hold this support to avoid falling further. However, going by past trends, each time this support has been tested, BTC has recorded slight gains, suggesting a concentration of buy orders at this price. 

Read Bitcoin’s [BTC] Price Prediction 2024–2025

Nevertheless, Bitcoin holders should still be cautious as the market suggested selling behavior.

Per CryptoQuant, BTC exchange inflows soared on the 4th of September, suggesting bearish sentiment as traders anticipate further price declines. 

Source: CryptoQuant