The last few weeks have not been kind to the cryptocurrency industry and financial markets. In line with fears of escalating conflict in Ukraine, civil unrest in Canada and the Fed’s decision to raise interest rates, prices of most assets have dropped significantly. Bitcoin, for example, has dropped to $36,000, which is its lowest price since Feb.
Keeping these events in mind, many imagined the start of another cryptocurrency bear market. In its recent report, blockchain data provider Glassnode pointed some of the bearish signals indicating that the price of bitcoin may continue to fall.
What are the signs?
The analytics firm noted that bitcoin’s on-chain activity has not made any progress over the past week, which is the first sign of waning interest and demand for the asset.
This is supported by non-zero balance BTC addresses, which typically exhibit retail investor behavior. Glassnode reported that in the last 30 days, around 220,000 of these wallets were completely emptied. By comparison, when the top cryptocurrency traded at around $60,000 in November, non-zero addresses hit an all-time high of nearly 39 million.
The percentage of profiting entities is also on the decline, which is somewhat to be expected as the asset price is far below its peak. According to Glassnode estimates, 10.9% of BTC investors have accumulated more coins at prices between $33,500 and $44,600.
As most of them have entered the market in recent weeks, Glassnode has determined that they could be the first to sell their portions if the price of BTC continues to fall.
Glassnode Chart, Source: Glassnode
STH vs. LTH behavior
The on-chain metrics provider addressed both long-term (holding their assets for more than 155 days) and short-term (less than 155 days) holders. Most STHs are estimated to have an average on-chain cost base of $47,200, which at the time of writing (BTC price $38,000) is an average unrealized loss of around 20%. .
As such, the report pointed out that the percentage of entities in profit varies between 65.78% and 76.7%.
Unsurprisingly, Glassnode concluded that short-term holders do not have so-called “diamond hands” and tend to get rid of their positions as soon as the volatile nature of BTC occurs. The company indicated that these investors have already started or are likely to start selling bitcoin if the asset does not reverse its recent downtrend.
In contrast, long-term holders, which entered the market before the race for $ 69,000 in November, tend to become calmer without selling surplus.
However, Glassnode has determined that more than half (54.5%) of total underwater BTC (4.7 million coins) is held by STHs. This could be another worrying sign for the asset’s short-term price movements, as these investors are “statistically more likely to spend” their holdings.
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