Recent on-chain data reveals that Bitcoin short-term holders are undergoing significant losses during a downturn in the market. Understanding the dynamics of these losses is crucial for both investors and analysts alike.
Bitcoin Short-Term Holder Realized Loss Has Hit High Levels Recently
In its latest weekly report, the on-chain analytics firm Glassnode discussed how the recent market downturn has influenced the situation of Bitcoin short-term holders.
The term “short-term holders” (STHs) applies to investors who acquired their Bitcoin within the last 155 days. This group typically includes new entrants to the market, who are often less resolute. Their response to market volatility is frequently characterized by a tendency to panic sell.
The most recent price decline has triggered such a response. The analytic firm has provided a chart illustrating the development of the Relative Unrealized Loss among short-term holders during this event:
The “Relative Unrealized Loss” metric quantifies the total amount of losses currently held by short-term holders. The term “relative” indicates that these losses have been normalized according to the total market cap.
As illustrated in the graph, the Bitcoin STH Relative Unrealized Loss has significantly increased and is now at levels typically observed during bull markets (as indicated by the red line).
Despite these substantial paper losses, Glassnode notes that their financial impact remains comparable to the yen-carry-trade unwind observed on August 5, 2024.
While losses remain unrealized, they only become recognized when an investor executes a transaction involving the affected tokens. Given that many in this cohort are now underwater following the recent crash, it is expected that a proportion of them may have capitulated, realizing their losses. Another chart details the losses actually realized by short-term holders:
The chart shows that the 30-day sum of Bitcoin STH Realized Loss recently reached $7 billion, marking a record for the current cycle.
However, when compared to previous major capitulation events, the scale of these losses appears more modest. For example, following the May 2021 selloff, realized losses hit $19.8 billion, and during the 2022 bear market, they peaked at $20.7 billion. In contrast, the current episode remains lower in magnitude.
BTC Price
As of this writing, Bitcoin is trading around $85,000, reflecting a nearly 4% increase over the last 24 hours.
