Bitcoin’s Recent Price Drop Under $50k: An Overreaction by Short-Term Holders
Bitcoin’s recent price decline, which saw the cryptocurrency plummet to a six-month low of $49,050 on August 5, was largely driven by an overreaction from short-term holders, according to a new report by Glassnode.
Bitcoin’s On-Chain Analysis by Glassnode
The analysis revealed that the average short-term holder (STH) – those who have held Bitcoin for less than 155 days – is now holding their coins at a loss, primarily due to purchases made during the 2024 rally when Bitcoin reached its all-time high of $73,835.
Glassnode noted that the market value to realized value (MVRV) ratio of STHs has dropped below the equilibrium value of 1.0, indicating that this cohort of Bitcoin investors carried the brunt of the recent market correction. While this is common during bull markets, sustained periods below 1.0 can increase the likelihood of investor panic and a more severe bearish market trend.
However, Glassnode argued that the recent price drop was an overreaction, as the spent STH cost basis and STH cost basis showed only a slight deviation during the correction. This suggests that the market may have overreacted to the sell-off below $50,000.
BTC/USD Technical Analysis
As Bitcoin continues to trade below its 200-day exponential moving average (EMA), short-term holders remain in a loss position. While the cryptocurrency briefly crossed the 200-day EMA on August 20, it was unable to hold above it, potentially due to factors such as outflows from spot Bitcoin exchange-traded funds, declining miner profitability, and macroeconomic concerns.
The release of the United States weekly jobless claims data and flash Purchasing Managers’ Index (PMI) for August on August 23 may provide a catalyst for Bitcoin’s price, potentially helping it reclaim the 200-day EMA.
Meanwhile, the notorious Mt. Gox exchange has been making significant moves, transferring a massive 13,265 Bitcoins in recent weeks. These transfers are part of the exchange’s ongoing legal rehabilitation plan to repay creditors.
Despite the recent price correction, Bitcoin’s technical analysis suggests a bullish outlook. The cryptocurrency is currently on the verge of breaking through the 50 EMA at around $61,000, which could pave the way for a move towards $70,000.
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