Bitcoin Market Situation: Short-term Holders Facing Losses While Average Price Remains Doubled
Despite the lack of upward movement in Bitcoin prices, a considerable number of investors are still profiting in the market. However, short-term holders have suffered most of the market losses.
Using on-chain pricing models and technical indicators, this article defines and explores a series of potential market scenarios for future developments.
Volatility indicators continue to face unprecedented obstacles, indicating a lack of strong investment sentiment among investors and suggesting the possibility of increased market volatility in the future.
Market Profitability Remains Strong
With Bitcoin prices dropping to $60,000, fear and pessimism have permeated the market.
However, based on the MVRV ratio, investors’ overall profitability remains strong, with an average profit of over twice the investment per Bitcoin. This ratio typically signifies the boundary between the “enthusiasm” and “euphoria” stages of a bull market.
Combining indicators to determine market expectations
Since Bitcoin reached its all-time high in March, its price has been consolidating within the range of $60,000 to $70,000. The lack of a clear trend in the market has left investors hesitant.
To determine the current position in the price cycle, we analyze the market using a simplified framework:
Deep Bear Market: Trading prices below the actual price.
Early Bull Market: Trading prices between the actual price and the true market average.
Bull Market Enthusiasm: Trading prices between the historical high and the true market average.
Bull Market Euphoria: Prices higher than the previous historical high.
Currently, after several brief periods of euphoria, the bull market has retreated to the level of the previous enthusiasm stage. The average cost basis for active investors is currently around $50,000, which is also the current true market average.
If the macro bull market continues, $50,000 will remain a key price threshold to keep the market excited.
Behavioral Analysis of Short-term Holders
The behavior of short-term holders has a significant impact on market volatility. By overlaying their cost basis with ±1 standard deviation levels, we find:
A large amount of unrealized profits indicates that the current market may be overheated, with the current value at $92,000.
The breakeven line for the short-term holder group is $64,000. At this point, the spot price is lower than the line, but the market is trending upwards.
A large amount of unrealized losses indicates that the current market may be oversold, with the current value at $50,000. This is consistent with the true market average and serves as a critical point in the bull market.
Analysis of Profitability of Short-term Holder Subgroups
Currently, subgroups with holding periods of 1 day to 1 week, 1 week to 1 month, and 1 month to 3 months are all experiencing losses. This indicates that the current consolidation range is not profitable for these short-term holders.
Among all short-term holders, the subgroup with a holding period of 3 months to 6 months is the only one that remains unrealized profits, with an average cost basis of $58,000. This cost basis aligns with the price low of this market correction, once again highlighting it as a crucial threshold to watch.
Technical Indicators Analysis
Mayer Multiple
This indicator is widely used for market analysis and evaluates the ratio between the current market price and its 200-day moving average. The 200-day moving average is typically used as a simple indicator to assess bullish or bearish momentum, and a breakthrough in either direction becomes an important turning point for the market.
The current 200-day moving average is $58,000, once again coinciding with the on-chain price model.
URPD (Unrealized Profit and Loss Distribution)
This indicator assesses the concentration of Bitcoin supply near specific cost bases. Currently, there is a significant concentration of Bitcoin suppliers between $60,000 and the historical high price, while the spot price hovers near the lower limit of these suppliers’ prices. This is consistent with the cost basis model of short-term holders.
Currently, approximately 2.63 million Bitcoins (13.4% of the circulating supply) are within the range of $60,000 to $70,000. Therefore, even slight price fluctuations can significantly affect the profitability of investors’ portfolios.
Overall, this also indicates that investors will be extremely sensitive to any further declines once the price falls below $60,000.
Future Volatility Expectations
After several months of minor fluctuations, there has been a significant decrease in market volatility across various rolling time windows. To illustrate this phenomenon, we introduce a simple model to identify the calm before the storm, as a decrease in this metric typically indicates an increase in volatility in the future.
This model evaluates the 30-day change in actual volatility within time windows of 1 week, 2 weeks, 1 month, 3 months, 6 months, and 1 year. When this change is negative across all time windows, it indicates a decrease in market volatility.
Another method to assess market volatility is by calculating the percentage difference between the highest and lowest prices in the past 60 days. From this indicator, we can see that market volatility has decreased to rare levels. Historically, this situation often occurs after a prolonged consolidation period and before significant market fluctuations.
Finally, we can further evaluate market volatility using the sell-side risk ratio. This ratio assesses the absolute value of realized profits and losses locked in by investors relative to the asset’s market capitalization. We can discuss this indicator within the following framework:
A high sell-side risk ratio indicates that investors are making substantial profits or losses when selling Bitcoin. This situation often occurs after a period of high price volatility, indicating the need for the market to find a new balance.
A low sell-side risk ratio indicates that most profits and losses from selling Bitcoin are minimal, suggesting that the market has reached a certain level of equilibrium. At this point, the “profit/loss potential” within the current price range has been exhausted, and the market environment shows no significant fluctuations.
It is worth noting that the sell-side risk of short-term investors has reached a historical low, with only 274 days (5%) out of 5,083 trading days showing lower levels. This indicates that a certain degree of balance has been established during the consolidation period of Bitcoin prices and suggests that volatility may increase in the near future.
Summary
Currently, the Bitcoin market is in a counterintuitive position—despite being 20% lower than the all-time high, investors are unenthusiastic. Each Bitcoin still holds unrealized profits double its cost. However, most new buyers are unexpectedly facing losses.
In this article, we analyze this phenomenon using on-chain and technical indicators and identify three key price ranges that may reignite investors’ interest.
If Bitcoin falls below the range of $58,000 to $60,000, it will result in significant losses for many short-term holders and push the price below the 200-day moving average.
If the market continues to hover between $60,000 and $64,000, it will continue the previous consolidation trend.
If the market can surpass the $64,000 hurdle, many short-term investors will turn losses into profits, potentially leading to an increase in investor sentiment.
From the current spot price and on-chain indicators, volatility has been decreasing across multiple time windows. The sell-side risk ratio and the 60-day price range have reached historical lows. This indicates that the current consolidation phase will not last long, and the market is about to enter a new price breakthrough phase.
