The crypto market has faced a massive correction over the past month – and new investors are proving incapable of stomaching the volatility.
Blockchain data show that 2024 Bitcoin buyers, who entered a raging early-year bull market in which Bitcoin (BTC) surged to a new all-time high, are now panic selling at a loss as the asset’s price reverses course.
Paper Hands Bitcoin Buyers
According to Glassnode, on-chain “realized losses” have surged over the past two months during periods of high volatility, one of which includes today.
Realized losses are tracked by examining the price at which coins are moved on a specific day, compared to when those specific coins were last moved. The discrepancy is presumed to represent a capital gain or loss depending on how Bitcoin’s current market price compares to when holders initially acquired their coins.
Today’s market dip is different from those prior, however: it marks the first decisive break below Bitcoin’s short term holder cost basis at $59,600 – the break-even point for the average new Bitcoin buyer.
“These recent buyers are statistically the most likely to panic,” wrote lead Glassnode analyst James Check in a newsletter on Wednesday. ”It delineates a point where a few too many coins and holders are underwater, which can be a deal breaker for bullish sentiment.”
Is The Bear Market In Effect?
While definitely a bearish sign, Check says that losing this price level doesn’t necessarily mean the Bitcoin bull market is over.
For example, open interest in the futures market still doesn’t seem excessive compared to the size of the market, which is a historical indicator of frothy market tops. Rather, the market appears more spot-driven, with a large portion of sell-side pressure last month stemming from the Grayscale Bitcoin Trust (GBTC).
At present, there are still 3.31 million BTC being held at a loss by short-term holders, representing two-thirds of their holdings.
Check and other analysts have noted that Bitcoin was due for a price crunch, having gone far too long without a meaningful pullback compared to prior bull runs.
Until today, Bitcoin’s price had not retraced more than 20% from its local highs since 2022, while other bull markets have seen multiple 20 to 30% drawdowns.
“A flush would also be good for the sustaining continuation of the bull market,” wrote Capriole Investment founder Charles Edwards to Twitter on Wednesday. “The sooner we get one, the better the long opportunities are.”
