Bitcoin’s plunge into its deepest correction since the end of 2022, falling below the 200 DMA, has resulted in unrealized losses for a significant portion of short-term investors, according to Glassnode.
Following several months of sideways price action, #Bitcoin has experienced its deepest correction since late 2022, trading below the 200DMA, and putting a significant number of Short-Term Holders into an unrealized loss.
Discover more in the latest Week On-Chain below?… pic.twitter.com/tzrYFjGisP
— glassnode (@glassnode) July 10, 2024
According to experts’ calculations, a 26% price drop from the ATH has rendered 2.9 million BTC out of 3.2 million BTC as ‘in loss’.
Despite increased financial pressure on speculators, the scale of realized losses remains moderate relative to market capitalization.
Analysts noted that the relatively small correction indicates a strengthening market structure and reduced volatility as cryptocurrencies mature as an asset class.
Based on the halving, the current cycle is one of the worst, despite the first-ever rise to ATH just before the miners’ reward was halved.
Analysts explained that during sustained bull markets, the local bottom coincides with the moment when the ‘in loss’ number of coins held by speculators ranges from 1 million BTC to 2 million BTC. In extreme cases, this figure can reach 3 million BTC.
In the latest sell-off to $53,000, the volume of coins held below their cost exceeded 2.8 million BTC (83% of the total supply). According to specialists, this is the second such episode in the last 12 months. The previous one was in August 2023 (over 2 million BTC).
Experts estimate that speculators have held over 2 million ‘in loss’ bitcoins for the past 20 days. This is a relatively small figure.
In the second and third quarters of 2021, a much larger portion of short-term holders experienced acute financial stress for 70 consecutive days. This period was strong enough to break sentiment and pave the way for the 2022 bear market, Glassnode noted.
Separately, specialists assessed the realized losses of short-term investors at $595 million. This figure is the highest since the cycle low of 2022. Only 52 out of 5655 trading days (< 1%) saw a higher daily loss, highlighting the severity of this correction in dollar terms, analysts added.
The opposite picture emerges when these losses are normalized to the total invested capital (Realized Cap). The recorded losses for this market segment remain typical compared to previous corrections.
In the chart below, experts highlighted in blue the periods when both the percentage of ‘in loss’ coins and the magnitude of realized losses deviated from the mean by more than one standard deviation.
In conclusion, Glassnode assessed the total realized losses of speculators and hodlers at less than 36% of the total invested capital.
During the capitulation events of September 2019, March 2020, and May 2021, the figure exceeded 60% for several weeks. In other words, long-term investors remain profitable despite the market ‘hysteria’, experts added.
In 10x Research, a drop in Bitcoin to $50,000 was considered possible due to the sharp change in sentiment.
Meanwhile, technical analyst Peter Brandt did not rule out a decline in the first cryptocurrency’s rate to $44,000.
Standard Chartered maintained expectations of a return to ATH in August and subsequent growth to $100,000 by the US presidential elections in November.