Generative Data Intelligence

Is The Bitcoin Dream Fading? Glassnode Data Reveals Newbies Facing Steep Losses

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Since its inception, Bitcoin, the preeminent cryptocurrency, has witnessed several market cycles, each with its highs and lows. Its volatile nature has recently tested investors’ mettle, especially those who ventured into Bitcoin in the past three months.

Bitcoin Short-Term Holders’ Cost Basis Troubles

New findings from analytics firm Glassnode have painted a detailed picture of the current scenario, revealing the challenges faced by short-term holders (STHs) of the premier cryptocurrency.

STHs, defined by Glassnode as entities holding Bitcoin for 155 days or less, have recently felt the heat. The firm’s research disclosed that roughly 97.5% of these investors grapple with unrealized losses.

To put it in perspective, as of September 17, Glassnode reveals the cost basis (or average purchase price) for those refraining from selling their BTC stands at $28,000, precariously hovering around 5% above the prevailing market rate.

Bitcoin short term holders and spender cost basis chart
Bitcoin short-term holders and spender cost basis chart. | Source: Glassnode

This situation stresses those new to the crypto ecosystem, causing many to reconsider their potential investment strategies.

Shift In Sentiment And Trend Confidence Metric

Delving deeper, Glassnode’s “The Week On-Chain” report highlights a marked change in sentiment among Bitcoin’s short-term holders. The firm identified a distinction between STHs based on their activity – those who spend their Bitcoin and those who hold.

An interesting trend emerged from this classification. The cost basis of the spenders dipped below that of the holders during the market’s descent from $29,000 to $26,000 in mid-August. This shift indicates a sentiment of concern and pessimism among the STH community.

Glassnode introduced a ‘trend confidence metric to quantify this sentiment further.’ This metric is derived by deducting the spender’s cost from the holder’s cost basis and dividing the resultant value by Bitcoin’s current price.

A chart illustrating Bitcoin new investor confidence in trend.
A chart illustrating Bitcoin’s new investor confidence in trend. | Source: Glassnode

A pivotal takeaway from this metric was the evident negative shift in market sentiment. As stated in Glassnode’s conclusion:

The Bitcoin market is experiencing a non-trivial shift in sentiment, with almost all Short-Term Holders now underwater on their supply.

The firm noted that the current atmosphere of unease has been “unparalleled” since the FTX debacle. Glassnode noted:

This has resulted in a negative shift in sentiment, with investors spending now having a lower cost basis than the rest of the cohort. This suggests a degree of panic is dominating this group, which is the first time since FTX collapsed.

Meanwhile, although Bitcoin’s short-term holders are grappling with steep losses, the asset experienced a slight uptick yesterday, pushing its price above $27,000. However, this gain was short-lived as Bitcoin quickly retraced its steps, trading at $26,605 at the time of writing, with a 2.1% decline in the last 24 hours.

Bitcoin (BTC) price chart on TradingView
Bitcoin (BTC) price is moving sideways on the 4-hour chart. Source: BTC/USDT on TradingView.com

Featured image from iStock, Chart from TradingView

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