Analyst warns Bitcoin has fallen below short-term holders’ cost price, the ability to quickly regain footing will be crucial

Analyst warns Bitcoin has fallen below short-term holders' cost price, the ability to quickly regain footing will be crucial

Analyst warns Bitcoin has fallen below short-term holders' cost price, the ability to quickly regain footing will be crucial

James Check, the Chief Analyst of Glassnode, a leading blockchain data analysis platform, stated in a post on Wednesday that the current trading price of Bitcoin (BTC) is lower than the average buying price of short-term holders, which could lead to “panic” caused by unrealized losses.

Bitcoin has dropped from around $64,000 to about $57,000 in the past two days, a decrease of over 10%. This is significant for short-term holders of Bitcoin (holding for less than 155 days) as their average buying price is approximately $59,600.

Source:
James Check

James Check believes that the importance of the cost basis of short-term holders lies in representing the average cost basis of investors who recently bought Bitcoin. “According to statistics, these recent buyers are most likely to experience panic.” At this specific price point, there is an excessive amount of coins and holders in a floating loss state, which “may become a disruptive factor for bullish sentiments.”

According to data from _Checkonchain_, as of May 1st, short-term holders collectively hold about 4.95 million Bitcoins, of which approximately 3.3 million are in a floating loss state. However, James Check also added:

Pay attention to whether the price returns above the cost basis of short-term holders.

Another Bitcoin on-chain analyst, On-Chain College, believes that the cost basis of short-term holders usually serves as support during bull markets and becomes resistance during bear markets. He explained on the X platform that this is a form of market psychology, where short-term investors would double down on their cost basis and buy when they anticipate higher future returns. Conversely, when these groups expect further losses during a bear market, they tend to sell when the price returns to the cost basis.

On-Chain College believes that breaking below this support level “is a crucial development, but it does not mean that the bull market is over.” He is now expecting the first retest of this price level.

On-Chain College states that a rapid breakthrough of the $59,600 price level for Bitcoin would be bullish, similar to the situation in June 2023. On the other hand, if the price continues to oscillate below this level and then returns above the cost basis of short-term holders, this trend can also be seen as favorable for the bull market, similar to the period from August to October 2023.

Source:
On-Chain College

However, On-Chain College also mentioned a bearish scenario, which is a trend similar to the one in December 2021 when Bitcoin dropped below $54,000, marking the beginning of the previous bear market. But he believes that the possibility of the two bullish scenarios he mentioned is greater now.

Data source