Nearly 90% of Bitcoin short-term holders are underwater, onchain data show

Bitcoin's (BTC) short-term holders, which tend to be sensitive to short-term price gyrations, are largely underwater on their coin holdings after the recent price slide, according to onchain data.

The leading cryptocurrency by market value fell over 10% to $26,200 last week, registering its worst performance since November.

With the sell-off, 88.3% of the supply controlled by short-term holders (STHs) or entities owning wallets that do not hold coins for over 155 days, has dropped into unrealized losses, according to data tracked by Glassnode.

In other words, of the 2.56 million bitcoin ($66.5 billion) held by short-term holders, around 2.26 million bitcoin have an acquisition cost higher than the going market rate.

"Sharp upticks in STH Supply in Loss tend to follow 'top heavy markets' such as May 2021, Dec 2021, and again this week. Out of the 2.56 million BTC held by STHs, only 300,000 BTC (11.7%) is still in profit," Glassnode's weekly newsletter published Monday said.

The proportion of supply controlled by short-term holders, which is held at an unrealised loss has surged. (Glassnode)

A heavy or top-heavy market is the one that is likely to have a tough time chalking out gains, in this case, due to potential liquidation by short-term holders facing losses.

That's already happening. Per Glassnode, the flow of STH-owned coins, with acquisition costs higher than the going market rate, into exchanges, the so-called loss dominance of STH volumes flowing into exchanges, has recently increased. Investors typically move coins from personal wallets to exchanges when intending to liquidate position or use them as margin in derivatives trading.

"This week, we saw the largest loss dominance reading since the March sell-off to $19,800. This suggests that the STH cohort are both largely underwater on their holdings and increasingly price sensitive," Glassnode noted.

Ilan Solot, co-head of digital assets at Marex Solutions, said the unrealized losses of short-term holders are one of the critical problems for the market right now.

"The real problem is the current fragile market set-up for BTC, because short-term holders are underwater in both price and narrative," Solot said in an email.

"Almost 90% of short-term holders (< 155 days) are suffering unrealized losses, which often correlates with selling pressure," Solot added, explaining that the spot-ETF narrative has shifted to “still decent odds of approval but delayed" amid rising bond yields and tighter liquidity conditions.