On-chain data shows that short-term Bitcoin holders have recently transferred more than 14 times the volume of profit than loss.
Bitcoin fell as short-term holders took profits
According to the latest weekly report from Glass knotholders of short-term bonds have recently started making profits again. A significant on-chain metric here is the “realized profit/loss ratio”, which, as the name suggests, tells us how the volumes of profits and losses carried by Bitcoin investors currently compare.
When the value of this metric is greater than 1, it means that the average holder on the network is moving their coins with a net gain. On the other hand, an indicator below this threshold suggests that the dominant form of selling on the market is incurring losses.
In the context of the current topic, what is captivating is the realized profit/loss ratio of only a segment of the BTC user base: short-term holders (STH). STHs refer to Bitcoin investors who have purchased their coins in the last 155 days.
Below is a chart shared by an analyst firm in a report that shows the trend of Bitcoin’s realized profit/loss ratio for STH over the last few years.
The value of the metric appears to have seen a acute surge in recent days | Source: Glassnode's The Week Onchain - Week 40, 2024
As shown in the chart, Bitcoin’s realized profit/loss for STH dropped to negative territory early last month as the cryptocurrency’s price crashed. This means that these investors were afraid of selling at a loss due to falling prices.
However, as the asset value increased from below, the indicator also changed its direction, taking positive values. Recent levels have been particularly high, with CPK’s profit-taking volume being approximately 14 times greater than its loss-making volume.
From the chart, we can see that high profit-taking by these investors typically coincides with at least local highs in Bitcoin’s price, so the coin’s recent decline could also be a result of all the profit-taking this cohort has been participating in recently.
However, capitulation by STH may lead towards a bottom, so when STH’s realized profit/loss changes direction again, it may be a signal that the coin may be close to hitting a low.
In the same report, Glassnode also mentioned the situation of long-term Bitcoin holders (LTH), who make up the rest of the Bitcoin user base. The percentage of supply affected by loss in this cohort appears to have increased recently.
The trend in the profit and loss supplies held by the BTC LTHs | Source: Glassnode's The Week Onchain - Week 40, 2024
This recent raise may be due to the fact that the best buyers are now part of the cohort that is now naturally at a loss. Even though 47.4% of LTH supplies are underwater, the actual scale of the group’s unrealized losses is still negligible.
BTC price
At the time of writing, Bitcoin is trading at around $60,400, down more than 5% in the last seven days.
Looks like the price of the coin has been on the decline recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, Glassnode.com, chart from TradingView.com
