Bitcoin Trading Below Recent Buyers' Average Cost Stirs Concerns of a Panic Sell-Off
Summary:
Bitcoin's current trading price is lower than the recent average purchase cost, creating potential panic among new owners due to unrealized losses, says on-chain analyst James "Checkmatey" Check. Despite a minor recovery, short-term holders, who have held Bitcoin for under 155 days, are still looking at an average of 3% unrealized loss. On-Chain College suggests that a quick recovery to $59,600 could indicate a hopeful trend based on similar past patterns. This follows the recent sharp drop in Bitcoin value.
Bitcoin (BTC) is presently priced lower than the average buying cost for recent purchasers, which could potentially induce a wave of "panic" due to impending losses, said an on-chain investigator. James Check, known as "Checkmatey", stated in his May 1 report that these new buyers are statistically the ones most likely to succumb to fear. He noted the sharp drop in Bitcoin's value to signal the start of May as a significant occurrence. Bitcoin plunged 8% below a critical support level, hitting the $56,814 mark briefly on May 1, as supported by the data from CoinMarketCap. The drop to this low, not seen since February, is particularly noteworthy for recent Bitcoin owners - those who have held for less than 155 days - who invested at an average of $59,600 per Bitcoin. Despite a slight recovery to $57,631 at the moment of publication, these recent holders are still grappling with an average unrealized loss of 3%. Over the past 24 hours, Bitcoin's current price shows a 4% dip. This abrupt fall led to the liquidation of $100.27 million in long positions during that period, as per CoinGlass reports. It is believed that the decrease in price was a consequence of a crypto sell-off in anticipation of the Federal Reserve's decision regarding interest rates which, contrary to the market's prediction of high rates, remained unchanged. Check indicates that even though an unrealizable loss isn't ideal, recent Bitcoin holders have faced similar situations in the past. He assured readers that breaching the short-term holder cost basis doesn't necessarily signal an end to the bull market; though it may exacerbate the situation, it is not irreparable. The short-term holder cost basis often serves as a support in bullish periods and as a resistance in bearish phases, according to crypto trading adviser, On-Chain college in its May 1 post. It also noted that a few factors don't necessarily indicate the end of the bull market. The On-Chain college mentions that a rapid surge to $59,600, approximately 2.2% more than Bitcoin's existing price, would be indicative of positivity. Similar patterns were seen in June 2023 when the price dipped below the cost basis but then quickly bounced back, followed by a significant increase. It also observed that during a volatile period below the short-term cost basis, in August 2023, Bitcoin's price did pull back after a few months. A continuous period below the cost basis, the On-Chain College suggests, could potentially signal a bullish trend. This content is not intended to serve as investment advice. All investment and trading decisions have a degree of risk associated with them, and readers are advised to conduct their own investigations before taking any action.
Published At
5/2/2024 6:14:14 AM
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