Bitcoin’s recent price plunge has dealt a heavy blow to newcomers, with short-term holders (STHs) facing a massive 93% in unrealized losses, levels reminiscent of the fallout from the FTX collapse. A report from crypto analytics firm Glassnode, released on August 7th, revealed that 97% of these losses can be attributed to STHs—investors who have held Bitcoin for 155 days or less. Meanwhile, long-term holders (LTHs), those with Bitcoin holdings exceeding 155 days, have largely weathered the storm unscathed.
Market Turmoil and Short-Term Holder Losses
This week’s market chaos saw Bitcoin prices dive to $49,500, triggering panic among STHs. The result? A staggering $850 million in Bitcoin was sold at a loss, representing just a fraction of the overleveraged positions that were liquidated. The market turmoil culminated in a $365 million ‘wipe-out’ in Bitcoin futures, marking one of the most significant purges of short-term investors since the FTX implosion. Glassnode’s analysis underscores the extreme stress experienced by STHs, with only 7% of their holdings currently in profit. The STH spent output profit ratio (SOPR), a critical measure of market profitability, has plummeted to lows seen on only 70 days throughout Bitcoin’s history. This suggests a deep level of financial distress among recent Bitcoin buyers, who have locked in an average loss of 10%.
Resilience of Long-Term Holders
Interestingly, while short-term holders were in panic mode, long-term holders appear to be doubling down on their investments. On August 8th, on-chain analytics platform Santiment revealed a notable accumulation trend among wallets holding between 10 and 1,000 Bitcoin. As Bitcoin’s price dipped below $50,000, these investors seized the opportunity, driving a surge in transactions. Santiment recorded 28,319 Bitcoin transactions worth over $100,000 and 5,738 transactions exceeding $1 million during the market drop.This rapid accumulation coincided with Bitcoin shedding around 18% on August 5th, plummeting from just over $60,000 to below $50,000 within 24 hours. However, the price quickly rebounded, climbing back to around $57,000 as opportunistic traders jumped in to capitalize on the lower prices.
Future Outlook Amidst Volatility
CryptoQuant, another analytics platform, suggested that the current market conditions might present a buying opportunity. They noted that SOPR metrics had reached levels last seen in December 2022, a period that initiated a significant bull run.As August continues to unfold, Bitcoin’s recent drawdown stands as the largest since its all-time high, with the STH sell-offs amplifying the market’s volatility. The forced closure of $365 million worth of contracts further exacerbated the situation, creating a three-standard-deviation reduction in open interest—a rare and significant event.Glassnode’s conclusion? August has been an “exceptionally eventful month,” with the market’s reaction characterized by panic and fear. However, the resilience of long-term holders and the rapid accumulation by savvy investors suggest that the current turbulence could pave the way for a potential recovery.
