Slump of Bitcoin: Are Short-term Holders Facing Continued Losses?

Key Points

• Bitcoin’s price fall has resulted in short-term holders experiencing modest losses.
• Heavy outflows from ETFs have contributed to the recent Bitcoin downtrend.

Bitcoin’s price has seen a significant drop, causing a loss for short-term holders who have held the cryptocurrency for less than 155 days.

The Fear and Greed Index for Bitcoin (BTC) showed a reading of 26, indicating a fearful sentiment in the market. This follows a 13.8% drop in BTC’s price in the last nine days.

Short-Term Holders’ Losses

Axel Adler, an analyst at CryptoQuant, noted that these short-term holders suffered minor losses due to the recent price fall. On average, they were 6.4% below the cost basis, which was approximately $90.5k.

Adler suggests that these losses could lead to a period of market consolidation and accumulation. However, this would require a steady demand and a shift in the macroeconomic sentiment, which is currently fearful and uncertain.

Impact of ETF Outflows

One of the main reasons for Bitcoin’s recent losses is the heavy outflows from US spot ETFs over the past ten days. On February 28th, there were inflows worth $94.3m, but this was overshadowed by the $1.14 billion outflow on February 25th.

The market sentiment remains bearish, and further losses could be on the horizon. Traders and investors are advised to be prepared for potential downturns.

The MVRV ratio, which is the market value divided by the realized value, indicates that a drop below 1 means holders are at a loss. In the previous cycle, after the BTC halving, the price did not drop below the short-term holders’ cost basis until mid-May 2021.

This could suggest that Bitcoin may experience further losses and downward trends in the coming weeks, potentially consolidating in the $65k-$70k region before recovering.