Long-Term BTC Holders Stable, Short-Term Investors Brace for Volatility

What a market! Bitcoin has gone from US$16,500 (AU$24,500) or so, in late 2022 to a new all-time high of US$73,750 (AU$109.258) in March 2024, giving traders and investors a return of over 300%. Those who found their way into the market last September would have still managed returns of 125% year-on-year.

Related: Fundstrat’s Tom Lee Urges Caution, Says Next Two Months Likely Very Volatile

Yet, the past few months haven’t been easy. While BTC has been trading in a band of around US$15k for the last few months, it has made lower lows and lower highs along the way, indicating a slow and steady decline.

Investors with Less Unrealised Losses Compared to Prior Cycles

Analysts at Glassnode state in their most recent report that while the market has seen this continuing downward pressure, most investors are still in the green. But there’s a real divide depending on how long you’ve been HODLing.

While most have “relatively small unrealized losses compared to prior cycles”, short-term holders are most at risk as the group of investors with the most unrealised losses.

The analysts write that The STH MVRV Ratio (Short-Term Holder Market Value to Realized Value), now below 1.0, indicates losses are comparable to levels seen during the post-FTX failure recovery in August 2023. However, their losses relative to market cap haven’t reached full bear market levels, instead mirroring the turbulent period of 2019.

This tells us that the average new investor is holding an unrealized loss. Generally speaking, until the spot price reclaims the STH cost basis of $62.4k, there is an expectation for further market weakness.

Glassnode

The MVRV ratio compares the market capitalisation (the current market price multiplied by the circulating supply) of a cryptocurrency to its realised capitalisation (an aggregate measure of the value at which coins were last moved).

Related: Bank Of Japan Could Raise Interest Rates, Sparking Further Crypto Market Fears

It’s particularly useful for spotting market tops and bottoms by identifying when the price is significantly divergent from what the actual on-chain transaction data might suggest is a “fair” value.

LTHs Slow Profit Taking, as New Supply Matures

During recent downtrends, many Long-Term Holders (LTHs) initially sold off their coins following the March peak, leading to a supply surplus.

The analysts write that these LTHs have now slowed down their selling, and coins acquired during that peak are transitioning into LTH status, which could shift where the market is headed.

However, historical examples of LTH supply increasing like this show that this usually occurs during the transition towards a bear market.

Glassnode

Meanwhile, the proportion of assets held by newer investors has decreased, indicating that the 2024 peak might be similar to the 2019 mid-cycle high rather than the major peaks of 2017 and 2021, the analysts concluded.

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