Market Wrap: Bitcoin Slumps Below $20K as Long-Term Holders Face Massive Selling Pressure - CoinDesk

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Bitcoin (BTC) slumped for the fifth consecutive day and was changing hands around $19,700, down 4.3% over the past 24 hours.

Some analysts believe bitcoin’s recent dips below $20,000 show the price level is not as critical anymore.

“A move below $17,500-$18,500 support could accelerate the sell-off, while a break of $19,500 may also signal further pain to come,” said Oanda senior market analyst Craig Erlam.

The Crypto Fear and Greed Index dropped six points to 16, the lowest in a week, but remains in the "extreme fear" category.

Nearly all altcoins were down Tuesday, with ATOM declining by the most, down 11% over the past 24 hours. Ether (ETH) was down 7.8%.

Long-term bitcoin holders are experiencing both actual and unrealized losses and are likely feeling massive selling pressure, the blockchain analysis firm Glassnode wrote in a report.

Actualized losses can be seen by using the Long-Term Holder Spent Output Profit Ratio (LTH-SOPR), a metric that compares the price at which a coin investor sold coins to the cost at which the coins were bought. An LTH-SOPR above 1.0 means that long-term holders are netting a profit.

However, the current LTH-SOPR is 0.67, the lowest since January 2019, meaning that the average long-term holder is selling coins at a 33% loss.

Realized losses can be seen through the long-term holders' cost basis. If the market valuation falls below the LTH-Cost Basis, it means that long-term holders are holding coins at a loss.

Right now, LTHs are, on average, underwater, with an aggregate unrealized loss of 14%.

The immediate consequence of this combination of actualized and unrealized losses is that long-term holders are selling coins, which are then bought by price-sensitive short-term holders, who are less likely to hold coins at a loss.

However, in order for the market to recover, these coins should mostly be held by price-resistant long-term holders.

During the depths of previous bear markets, long-term holders held more than 34% of the crypto supply at a loss while short-term holders held just 3% to 4%. However, short-term investors currently hold 16.2% of the supply, suggesting that more tokens have to be redistributed to long-term holders before the market can emerge from a bottom.

“While many bottom formation signals are in place, the market still requires an element of duration and time pain to establish a resilient bottom,” Glassnode wrote. “Bitcoin investors are not out of the woods yet.”

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