Bitcoin’s Sharp Decline: Short-Term Holders Experience 50% Profit Erosion Amidst Rapid Market Exit

The recent drop in Bitcoin price has wiped out more than half of the profits of short-term holders, according to data from CryptoQuant, a provider of on-chain and market data analytics for cryptocurrencies. Many holders who bought Bitcoin in less than a month are now selling at a loss, creating a downward pressure on the market.

On-chain metrics show pain for short-term holders

CryptoQuant tracks two metrics that measure the unrealized and realized profit and loss (P/L) of Bitcoin holders based on the price they acquired their coins. The unrealized P/L shows the difference between the current price and the average cost of acquisition, while the realized P/L shows the difference between the price at which the coins were moved and the average cost of acquisition.

According to CryptoQuant, the unrealized P/L of short-term holders (those who held Bitcoin for less than 155 days) has fallen from 25% to -25% since Bitcoin reached $44,000 on January 8, 2024. This means that the average short-term holder is now underwater, as the current price of Bitcoin is lower than the price they paid for their coins.

The realized P/L of short-term holders has also declined from 15% to -10% in the same period, indicating that many short-term holders are selling their coins at a loss. The data shows that the outflow of Bitcoin from exchanges has increased since January 8, suggesting that some holders are moving their coins to cold storage or other platforms, while others are liquidating their positions.

Bitcoin price faces support at $38,000-$36,000 range

The decline in Bitcoin price has been attributed to various factors, such as the uncertainty around the regulatory environment, the competition from other cryptocurrencies, the profit-taking by institutional investors, and the technical resistance at $50,000.

Bitcoin is currently trading at around $42,000. The cryptocurrency has been struggling to break above the $45,000 level, which has acted as a strong resistance in the past week.

According to some analysts, the next crucial support level for Bitcoin is in the range of $38,000 to $36,000, which coincides with the 200-day moving average and the 61.8% Fibonacci retracement level of the rally from $28,000 to $53,000. If Bitcoin fails to hold above this range, it could trigger a further sell-off and test the $30,000 level, which was the previous low in December 2023.

However, some bullish factors could also support the Bitcoin price in the near term, such as the growing adoption by mainstream companies, the increasing demand from retail investors, the limited supply of 21 million coins, and the positive sentiment from some influential figures in the crypto space.

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