The recent steep decline in Bitcoin prices has had a significant impact on short-term holders (STH), pushing prices below the STH cost basis. A sudden 10% plummet in value to $26,200 has resulted in losses.
Data reveals that over 88.3% of Bitcoin held by STH, those who have held their coins for less than 155 days, is now in unrealized losses. This percentage equates to about 2.26 million out of the 2.56 million Bitcoin, or roughly $66.5 billion, bought at a price that exceeds the current market rate.
The sell-off also impacted the Realized Price and long-term holder (LTH) cost basis, both of which are trading noticeably below their usual levels at $20,300. The LTH cost basis is currently above the realized price of the crypto, placing the market in a precarious position from a psychological standpoint.
The supply held by the STH cohort is somewhat 'top heavy', with a significant majority having a cost basis above $29.000. A cost basis refers to the accumulated fair market value of the cryptocurrency token acquired, plus the profits at the time sold. It is generally used to calculate capital gains or losses for tax purposes.
A rising LTH Realized Price is typically a bullish sign with LTH selling older coins with a lower cost basis. However, the recent sell-off and subsequent dip in prices have created a top-heavy market situation where gains are hard to come by due to the potential liquidation by STH facing losses.
This trend was previously observed in May and December 2021 and seems to be repeating itself this week.
These developments have highlighted the fragility of the Bitcoin market, with Ilan Solot, co-head of digital assets at Marex Solutions, noting thatSTH are "underwater in both price and narrative." The narrative around the spot-ETF has shifted from being a sure thing to having “still decent odds of approval but delayed."
With the high percentage of STH facing unrealized losses and the cost basis of LTH around $22,000, there is a potential for increased selling pressure in the Bitcoin market.
The actions of these STH will play a crucial role in determining the future trajectory of Bitcoin as the market continues to navigate these turbulent waters.
