Bitcoin [BTC] has experienced a 22% drop from its peak above $73,000, leading to short-term Bitcoin investors, who entered the market during the early 2024 surge, facing considerable unrealized losses.
The latest weekly onchain report from Glassnode highlights that the Market Value to Realized Value (MVRV) ratio for short-term holders has dipped below the critical value of 1.0, indicating that the average recent investor has yet to recover their initial investment.
For these investors to become profitable once more, Bitcoin must reclaim $62,400. Presently, BTC is valued at $56,785, necessitating a 9% increase for these traders to regain profitability.
Continued Selling Activity Remains Below Previous Bear Market Levels
While a section of Bitcoin investors faces unrealized losses, some are opting to sell in order to mitigate potential downsides. Glassnode reports a significant rise in events where losses are realized, with more traders offloading holdings as soon as Bitcoin demonstrates a higher low.
However, these sell-offs have not yet reached the extreme levels observed during the bear markets of 2021 and 2022, even with the Bitcoin Fear and Greed Index indicating “fear” at 29.
Short-term selling tendencies are also evident in the Spent Output Profit Ratio (SOPR) on CryptoQuant, which currently sits below 1, suggesting a willingness among some traders to sell at a loss.
Nonetheless, the ratio has not plummeted to historic lows, indicating that a significant number of traders are opting to hold on to their BTC.
Furthermore, long-term Bitcoin investors have curtailed profit-taking activities, with the volume of coins held by these investors noticeably rising, a pattern typically preceding a shift to a bear market.
According to Glassnode’s analysis, the decrease in loss and profit-taking activities at present price levels indicates a saturation point and foresees a potential spike in volatility in the near future.
Persistence of Bearish Trend in BTC Price Movement
Bitcoin has been forming progressively lower highs on its daily chart over the last six months, pointing to bearish dominance in the market despite intermittent buying spurts.
The Awesome Oscillator (AO) corroborates the bearish outlook, consistently remaining in the negative zone since August. The red histogram bars on the AO signify a sell signal, underscoring the prevailing bearish conditions.
Convergence of the 20-day Exponential Moving Average (EMA) with the 200-day EMA from above reveals a weakening of short-term momentum.
Recent data also shows that BTC faced rejection at the $58,530 resistance level, indicating a lack of demand. There is now a risk of a decline to test support in the vicinity of $54,900 or the 0.236 Fibonacci retracement level.
For BTC to avert further decline, it must hold this support level. However, historical trends indicate that each time this support has been tested, BTC has observed marginal gains, suggesting accumulation of buy orders at this price point.
Despite this, Bitcoin holders are advised to exercise caution given indications of selling pressure in the market.
As noted by CryptoQuant, BTC experienced heightened exchange inflows on September 4th, signaling a bearish sentiment as traders brace for potential price downturns.