After hitting an all-time high of $64,863.10 on April 14, Bitcoin has now given up 50 per cent of its gains with virtually every buyer of the cryptocurrency since February in losses. After the dramatic crash, which saw the cryptocurrency tumble to nearly $30,000, the currency has moved in a range of $9,000 in the past few days suggesting that the market is still finding its feet after being dazed by the sell-off.
The selloff in late May in Bitcoin and other cryptocurrencies was largely driven by regulatory actions taken by China against cryptocurrency dealings and miners, which snowballed into liquidation of leverage-based positions in the market taken by short-term holders of the coin.
According to Bybt.com, as many as 887,000 trading accounts were liquidated on May 20 alone reflecting the sheer magnitude of losses for investors. Currently, around 26 per cent of the Bitcoin supply held by short-term traders (less than 155 days) is underwater after the crash, according to data available on Glassnode.
Interestingly, long-term holders of Bitcoin, defined as those who have held their coin for a period of more than 155 days, have not panicked in the crash of the past two weeks.
“LTHs overall have returned to accumulation. This suggests that early bull market buyers (prices less than $30,000) have HODLed a reasonable volume of supply, and should this trend continue, may indicate a longer term supply squeeze is in play,” Glassnode said in its newsletter released on Monday.
At the same time, Bitcoin miners have also started to accumulate their coins during the crash. With two major players in the market showing gumption for accumulation of the cryptocurrency after such a rapid fall, it should lend confidence to investors.
Yet, the fact remains that the longer Bitcoin price stays closer to the $30,000 mark, the more difficult it will get for short-term coin holders, who are deep in the red holding their coins. Therefore, the majority of the selling pressure will come from this lot as they are likely to use any bounce to sell.
What will determine the fate of the Bitcoin market going ahead is what the long-term holders of the coin, who purchased it during December and January, will do. These coin holders are still at cost on their holding since the price is hovering around the 155-day threshold.
“LTHs, on the other hand, remain largely in profit, but approaching the NUPL (Net Unrealised Profit or Loss) threshold of 0.75. In previous cycles, this has signalled the start of more bearish trends as LTHs tend to capture remaining unrealised gains,” Glassnode noted.
For the time being, therefore, it is likely that the Bitcoin market may go nowhere till either the long-term holders or the short-term sellers assert their dominance in this tug of war.
