The sharp decline in the price of Bitcoin (BTC), the world’s largest cryptocurrency, has taken a heavy toll on short term holders. Recent reports have revealed that many of these BTC holders are now in the red, suffering losses from the cryptocurrency’s price crash and ongoing market volatility. 

On September 4, Glassnode, an on-chain market intelligence platform, released a detailed report on the financial strain short term Bitcoin holders are currently experiencing due to rising market volatility and declines in the price of BTC. 

Currently, short-term holders are holding Bitcoin at a significant loss, making it a potential risk source. Looking at the broader market, unrealized losses, which sit at just 2.9% of BTC’s total market capitalization, remain historically low. This indicates that the aggregate investor is still relatively profitable in the face of market declines, with the ratio between total Unrealized Profit being 6X larger than Unrealized loss.  

Nevertheless, short-term BTC holders who recently bought Bitcoin are bearing the brunt of the market declines and shouldering the majority of the pressure. Their Unrealized loss significantly dominates overall and continues to grow, but this situation has not reached full bear market conditions like previous market crashes. The losses however, are mirroring a more turbulent period, similar to what was seen in 2019. 

These market observations have been drawn from evaluations of the Short Term Holder Market Value To Realized Value ratio (STH MVRV). According to Glassnode, the STH MVRV of Bitcoin has collapsed below the breakeven value of 1.0, presently trading at similar levels as August 2023, when the market was recovering from the FTX failure. 

This assessment suggests that the average new BTC investor is holding an unrealized loss. Until the price of Bitcoin surpasses the $62,400 mark, Glassnode has predicted further weaknesses in the already declining market. 

Presently, all age bands and segments within the short-term holder group are experiencing unrealized losses. This indicates widespread stress amongst short-term Bitcoin investors in the crypto market.   

Glassnode’s report provides a deep analysis of the current state of the Bitcoin market, particularly assessing price movements, invested sentiment, and overall market behavior. Over the past six months, Bitcoin’s price action has been flat, with numerous investors showing indifference or becoming apathetic.

In the last three months, however, the market has experienced more downward pressure, resulting in a significant price drawdown in BTC. Although compared to historical bull market regimes, this decline is relatively smaller than past bear markets. 

Glassnode revealed that Realized Profit has plummeted dramatically since Bitcoin’s all-time high of above $73,000 in March 2024. This suggests that fewer Bitcoins are being sold at a profit while Realized Losses are rising as the market continues to dwindle. 

Bitcoin’s current Sell-Side Risk Ratio is also very low, implying that most assets being traded are close to their breakeven cost. This indicates that the current market could be overly saturated in terms of profit and loss taking, hinting at the possibility of more volatility in the future. 

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