Majority of Short-Term Bitcoin Holders Facing Losses, Onchain Analysis Reveals

The recent decrease in the price of Bitcoin has presented a complex scenario for individuals holding the cryptocurrency in the short term, as the value of their holdings now sits below their original acquisition costs. This pattern is particularly evident among those who hold Bitcoin for shorter durations, a demographic that tends to respond more acutely to rapid changes in price.

Bitcoin, the foremost cryptocurrency in terms of market capitalization, witnessed a substantial decline of more than 10%, plummeting to $26,200 during the preceding week. This drop constitutes the most significant reduction since November. Consequently, data compiled by Glassnode reveals that approximately 88.3% of the total supply controlled by short-term holders (STHs), which refers to entities maintaining wallets for less than 155 days, is currently experiencing unrealized losses. Specifically, among the 2.56 million bitcoins held by short-term holders (equivalent to $66.5 billion), approximately 2.26 million bitcoins were obtained at a cost exceeding the prevailing market price.

The percentage of the total supply owned by short-term holders, who are currently experiencing unrealized losses, has seen a significant increase. This data comes from Glassnode. 

Historical data trends underscore the occurrence of notable surges in the supply held by short-term holders encountering losses, often coinciding with periods termed "top heavy markets." This pattern was notably observed in May 2021, December 2021, and most recently, as highlighted in Glassnode's weekly newsletter.

Consequently, this situation has prompted an increased movement of coins owned by short-term holders to cryptocurrency exchanges, indicating an escalation in the prevalence of volumes from short-term holders flowing into exchanges while incurring losses. This activity could potentially signal preparations for the liquidation of holdings or the utilization of these coins as collateral in the realm of derivatives trading.

Ilan Solot, who serves as the co-head of digital assets at Marex Solutions, emphasized the gravity of these unrealized losses among short-term holders. He underscored that this scenario presents a substantial challenge to the present market structure for Bitcoin, as a significant proportion of short-term holders are currently grappling with unrealized losses. This could potentially contribute to a heightened selling pressure in the market. Solot emphasized that nearly 90% of short-term holders are currently facing unrealized losses, indicative of an environment characterized by increased selling pressure. Moreover, he pointed out that changes in the narrative around spot-ETFs are influenced by factors like rising bond yields and tighter liquidity conditions, leading to the anticipation of delays in approval, despite the overall probability of approval remaining favorable.