In summary
- On Thursday morning, Bitcoin failed to hold levels above $58,000, falling to $56,700 and trading flat on the day.
- According to data from CoinGecko, the price of Bitcoin is currently at $56,794, up 0.6% over the past 24 hours and down 4.7% over the week.
- New analysis reveals a growing risk factor in the Cryptocurrency market: short-term holders who are currently sitting on losses on their investments could trigger significant volatility if they decide to cut their losses.
On Thursday morning, Bitcoin failed to hold levels above $58,000 falling to $56,700 and trading flat on the day.
According to data from CoinGecko, the price of Bitcoin is currently at $56,794, up 0.6% over the past 24 hours and down 4.7% over the week.
Even as Bitcoin fell just under 20% from its all-time high, a new analysis has revealed a growing risk factor in the cryptocurrency market: short-term holders who are currently sitting on losses on their investments could potentially trigger significant volatility in the market if they decide to cut their losses.
Even though the average Bitcoin investor remains in a profitable position, those who have recently entered the market or acquired Bitcoin in the past six months are facing substantial unrealized losses. This dynamic creates a potentially volatile situation that could affect the cryptocurrency market as a whole.
“The Short-Term Holders cohort remains deeply in the red on their holdings, making them a source of risk at the moment,” a report from Blockchain intelligence firm Glassnode said. The financial stress of this group is evident in key metrics, with their unrealized losses dominating the overall market picture.
The report warns that this overall stability could be disrupted if short-term holders decide to exit their positions en masse. The $51,000 price level is identified as a critical support that must hold to preserve the current market structure.
The analysis reveals that unrealized losses of short-term holders have been steadily increasing over the past few months. All groups, from those holding for just a day to those holding for up to six months, are currently in the red.
The average cost basis for these investors ranges from $59,000 to $65,200, significantly above the current market price.
This situation is reminiscent of the volatile market conditions seen in 2019, rather than a full-scale bear market, the report’s authors noted. However, it still presents considerable risk.
“Until the spot price claims the near-term holders’ cost basis of $62,400, further market weakness is expected,” the report said.
Image: Glassnode
The implications of this stress on short-term holders go beyond their individual positions. Their potential selling pressure could trigger further volatility in the market, especially given the current low levels of overall earnings and profit- and loss-taking activities.
Interestingly, while short-term holders struggle with losses, long-term investors appear to be in a more stable position.
The report indicates that long-term holders have slowed down their profit-taking activities, and coins accumulated during the recent all-time high surge are being converted into long-term holdings.
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