Analysts point to a potential “source of risk” as short-term Bitcoin holders grapple with unrealized losses, raising concerns of potential sell-off pressure.
In a September 4th Glassnode report, the analytics firm pointed to short-term Bitcoin holders, those who have held Bitcoin for under 6 months, as a risk factor.
While the average Bitcoin investor remains in a profitable position, these recent entrants continue to hold at an unrealized loss, which could lead to substantial sell-side pressure in the event of a further market correction.
Glassnode noted that the situation is more reminiscent of the choppy market conditions seen in 2019, rather than a full-scale bear market. However, it still presents a considerable risk, the report added:
“Until the spot price reclaims the STH [Short-Term Holder] cost basis of $62.4k, there is an expectation for further market weakness.”
This dynamic creates a potentially volatile situation, as these holders are “shouldering the majority of the market pressure” going into what is anticipated to be Bitcoin’s toughest month.
Bitcoin’s Toughest Month: September and its Challenges
This development comes amidst what has historically been a volatile month for Bitcoin, with September consistently delivering the worst returns.
The sell-side pressure presented by short-term holders only adds to the biggest risk factor, a potential aggressive US Federal Reserve rate cut – something Bitfinex analysts cited as a potential catalyst for a 20% Bitcoin decline.
While a 25 basis point cut is seen as the more favorable outcome, possibly leading to “lead to long-term price appreciation for Bitcoin as liquidity increases and recession fears ease,” the report cautioned that a more aggressive cut could have the opposite effect.
A 50 basis point rate cut could potentially trigger a correction, pushing Bitcoin deeper into its recent slump as “recession concerns escalate.” The analysts added:
“If we were to speculate, we would caution to expect a 15-20 percent decline when rates are cut this month, with a bottom of $40-50k for BTC”
This additional pressure from short-term holders could magnify such a severe drawdown, adding another “layer of complexity, potentially exacerbating the market’s volatility.”
Short-term Pain For Long-Term Gain: 100K BTC ‘Still in Play’
If Bitcoin were to see a 20% decline, it would reach $46,000, levels unseen since February 8th. This view is consistent with past analysis from 10x Research, which identified the low 40,000s zone as an optimal entry point for the next bull market.
However, not all analysts agree on the severity of the potential correction. Popular crypto analyst Moustache believes that the market bottom could be around $57,000, citing historical fractal patterns used to identify key support and resistance levels and potential trend reversals.
Bitcoin currently has significant support at $57,000. However, a possible move below would liquidate over $300 million worth of cumulative leveraged short positions, according to CoinGlass data.
Although Bitcoin price action may be bleak in the near term, Based on historical and technical patterns, a six-figure bitcoin Bitcoin is “still in play.”
Notably, multiple analysts have echoed this sentiment, and pointed to the final quarter of this year as a potential breakout point, describing it as having “epic” potential for price action.
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