Key Points
- Short-term holders of over 2 million Bitcoin are currently making a loss due to market volatility.
- The incoming Trump administration is predicted to be bullish for Bitcoin and the wider cryptocurrency market.
The anticipated Trump administration is expected to have a positive impact on Bitcoin and the broader crypto market.
However, the recent market turbulence and a temporary dip below $90K have underscored an important short-term risk factor – Bitcoin short-term holders (STH).
Short-Term Holders and Market Impact
These investors have held Bitcoin for approximately six months (155 days) or less. Their cost basis or average purchase price (STH realized price) always serves as a key support level.
Furthermore, their profitability level can rapidly impact the market, as they can sell at a loss when the price falls below their cost basis. This tendency was evident during the liquidation cascades on August 5th and December 5th, which pulled Bitcoin’s price down.
Blockchain analytics firm Glassnode has set the current STH realized price at $88.4K, just shy of the low of $89.25K recorded on January 13th. In simple terms, to maintain a consistent upward trend, bulls must keep Bitcoin above this level.
Millions of Bitcoin Underwater
Glassnode also reported that this week’s market volatility has pushed 2 million to 3.6 million Bitcoin held by STH underwater. However, the firm clarified that these figures are below a crucial historical threshold to trigger an alarm.
“While significant, this range is still lower than the 4 million coins in loss during the local market low set between July and September 2024. This suggests that the current market is likely in a less distressed state than it was during the previous corrective phase,” Glassnode stated.
Analysts anticipate a surge to $118K in the medium term, which could bring most STH Bitcoin back into profit. This optimism is also backed by the MVRV-Z score (1-year-rolling), a valuation and market cycle indicator.
This metric had previously flagged Bitcoin local and cycle peaks when it crossed above 2. When it soared above 2, the crypto hit local tops in March ($73K) and December ($108K).
At present, the indicator has fallen below 1.5, suggesting enough room for growth for Bitcoin to rise higher before hitting a local or cycle peak. Consequently, it also implied that Bitcoin was relatively undervalued at current levels.
However, it’s important to note that despite Bitcoin’s attractive growth potential, a price drop below the STH cost basis of $88.4K could harm the current bullish market sentiment. Therefore, it’s worth monitoring as a risk management factor.
As of now, Bitcoin was valued at $99.9K, about 7% away from its all-time high of $108.3K.
