Short-term holders (STHs) of Bitcoin are feeling pain as BTC falls in price, creating the potential for heightened volatility, according to analytics firm Glassnode.
In a new report, Glassnode says that the short-term holder cohort is “heavily underwater” in their positions.
“The Bitcoin market has continued to experience downward pressure over recent months despite the average Bitcoin investor remaining profitable overall. However, the short-term holder cohort remains heavily underwater on their holdings, making them a source of risk for the time being.”
According to Glassnode, short-term Bitcoin holders are a primary risk to BTC given they are significantly underwater and therefore could be one of the main sources of selling pressure.
“Nevertheless, the short-term holder cohort continues to carry elevated unrealized losses, indicating they are the primary cohort at risk and the expected source of sell-side pressure in the event of a downturn.
Alongside this, profit and Loss-taking activities remain remarkably light, suggesting a saturation of our current range with critical metrics such as the sell-side risk ratio, which alludes to a potential for heightened volatility in the near future.”
Using the market value to realized value (MVRV) ratio, Glassnode says short-term holders present the risk of more weakness to come for Bitcoin.
The MVRV is the ratio of a crypto asset’s market capitalization relative to its realized capitalization or the value of all the coins at the price they were bought.
Says Glassnode,
“This tells us that the average new investor is holding an unrealized loss. Generally speaking, until the spot price reclaims the STH cost basis of $62,400, there is an expectation for further market weakness.”
Source: Glassnode
At time of writing, Bitcoin is trading at $55,501, up nearly 2% on the day.
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