In the latest edition of its weekly “The Week On-Chain” newsletter, crypto analytics firm Glassnode reported that Bitcoin’s short-term holders (STHs) are in “panic mode” after suffering a whopping 97.5% in unrealized losses from their investment.
STHs correspond to entities that purchased BTC and held the assets for 155 days or less.
Investor Sentiment Toward Bitcoin Turns Negative As STHs Suffers Loss
The original cryptocurrency’s price action over the past year has tested the resolve of investors. But according to Glassnode, short-term holders, who bought Bitcoin over the past three months have seen their aggregate cost basis fail as the market lost its support.
As of September 17, the cost basis for those who are not spending their BTC stood at $28,000, which is 5% above the current price of the asset in the spot market, commented Glassnode.
The crypto analytics firm conducted research in which it separated the STH cohort into a group of holders and spenders. The company had discovered a relationship between “abrupt changes in implied (unrealized) profitability and the shift in spending by STHs (realized profitability),” which it used as a base to prove its findings.
Glassnode found that the cost basis of STHs that were spending Bitcoin fell below the cost basis of holders after the market “sold off from” $29,000 to $26,000 in mid-August. The report read that the event led to a degree of panic and negative sentiment taking hold of the market in the near term.
BTC To Go Lower In The Coming Months Due To “Non-Trivial” Shift In Sentiment
Glassnode’s findings are in line with the overall sense of caution among Bitcoin traders and market analysts who expect the cryptocurrency to test much lower levels in the coming weeks or months.
However, there is still reason to be optimistic as many sense a change in fortunes for Bitcoin’s price in the fourth quarter of this year, which will run from December to March 2024. Earlier this week, crypto news outlet Cointelegraph reported that the Crypto Fear & Greed Index remains only modestly bearish at current BTC price levels.
Despite this, the threat of permanent loss for STHs is starting to feel all too real. Analysts at Glassnode showed a trend confidence graph that subtracts the spender cost basis from the holder cost basis and divides the sum by BTC’s current price.
Concluding its report, Glassnode wrote that the Bitcoin market was experiencing a “non-trivial shift in sentiment” towards the negative as almost all Short-Term Holders are “underwater on their supply”. This has resulted in investor spending now having a lower cost basis than the rest of the STH cohort.
Glassnode suggested that the holding group was experiencing a level of panic that had not been since the time the FTX exchange collapsed.
STH Supply Of Bitcoin Declines, While Long-Term Holders Are Unwilling To Liquidate
In last month’s edition of the weekly gazette, Glassnode reported that Bitcoin’s short-term holder supply had declined to just 2.56 million BTC, a level that was last observed in October 2021, just days after Bitcoin hit its all-time high of $69,000.
On the contrary, the supply held by long-term holders (LTHs) continued to increase, hitting an all-time high of 14.6 million BTC. Glassnode suggests that very few number of Bitcoin investors were willing to liquidate their positions.
At the time of writing, Bitcoin (BTC) is trading at $26,605 – down 0.2% in the last 24 hours.