After the Bitcoin price crash last week, on-chain data reveals a picture that points to a “top-heavy” price. Glassnode’s latest insights shed light on the current market dynamics, where a significant chunk of the BTC spot supply finds itself with a cost basis either near or surpassing the prevailing price.
“Here we see that 12.8% (2.48M BTC) of the supply fell into an unrealized loss this week, setting a lower low on this metric. This suggests that ‘top heaviness’ in spot markets may also be a factor in play,” commented Checkmate, Glassnode’s chief analyst.
Notably, Long-Term Holders (LTHs) have displayed remarkable resilience in this turbulent period. Their interaction with exchanges remains largely unaltered, with the aggregate balance of LTHs marking a new All-Time High (ATH) this week. In stark contrast, the behavior of Short-Term Holders (STHs) emerges as particularly salient.
Checkmate notes, “With LTH supply at ATH, we can also see that STH supply remains at multi-year lows.” The data further underscores this: out of the 2.56M BTC held by STHs, a mere 300k BTC (11.7%) remains in profit, meaning that 88.3% are in loss. This needs to recover quickly, else it adds to the bear case, according to Checkmate.
Historical data indicates sharp upticks in STH supply losses following periods characterized as ‘top heavy markets’ – similar to the events observed in May 2021, December 2021, and once again, the last week.
Implications For Bitcoin Price
The fluctuating dynamics between profits and losses witnessed in the market can be further distilled through the Profit or Loss Bias (dominance) metric. As the 2023 rally unfolded, a discernible shift was noted in the STH cohort’s position: “This week we saw the largest loss dominance reading since the March sell-off to $19.8k. This suggests that the STH cohort are both largely underwater on their holdings, and increasingly price sensitive,” added Checkmate.
An intriguing revelation comes from Glassnode’s experimental tool aimed at discerning market inflection points. With a meticulous design that maps macro trends of investors and the prevalence of profitability over losses (and vice versa), this tool offers a nuanced ‘Momentum indicator’.
According to Checkmate, “We can see that after several months of declining profit dominance, Loss momentum…
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