Believe in the bull
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Only 12% of Short-Term Holders (STHs) of bitcoin are currently in profit, according to on-chain analysis by Glassnode, a market intelligence firm, with Long-Term Holders (LTHs) outperforming by a wide margin.
Glassnode defines an STH as any entity that’s held its coins in the same wallet for 155 days or less. Data about such holdings is freely available thanks to the transparent nature of the blockchain ledger, though interpreting it can be tricky.
“Out of the 2.56m BTC held by STHs, only 300k BTC (11.7%) is still in profit,” the company noted, estimating the aggregate break-even price for this cohort at about $28,600 – an average 10% loss against today’s price.
The remaining 16.9m BTC currently in circulation is held by LTHs – entities popularly referred to as ‘hodlers’ or ‘diamond hands’ – who are less susceptible to short-term price movements and more likely to have bought in at lower prices. Their aggregate realized price is about $20,300, Glassnode said, giving them an average profit of 28% to date.
The tiny proportion of short-term holders in the black may seem surprising given that bitcoin has depreciated by just 4% over the past 155 days: the cryptocurrency was trading for about $27,000 on March 19, versus about $26,000 at the time of writing.
However, despite broadly moving in a sideways channel for five months, bitcoin has experienced two periods of short-lived but extreme volatility – price action that LTHs can easily ignore, unlike their more sentiment-driven, often over-leveraged peers. Those shocks to trading portfolios occurred on June 20-21 (when bitcoin pumped by 16% in a 48-hour period) and August 17 (when bitcoin plunged by 12% over the course of just one day).
While these periods of volatility started and ended at virtually the same price – $26,755 and $26,812 respectively – they still clouded the judgment of STHs who suffer from poor risk management and emotional control.
Put another way, ignoring short-term price action would have saved the majority of these STHs from opening or closing trading positions that, ultimately, moved their average cost basis higher.
The lesson? Don’t trade bitcoin in the short-term.
The outlook? Uncertain. For the bears, this month’s price crash followed July’s divergence on the weekly-chart MACD indicator – a measure of momentum, which can predict the imminent reversal of a trend (in this case, bitcoin’s rising tide since the beginning of the year). For the bulls, the collapse of the daily-chart RCI indicator to heavily oversold territory – combined with August’s higher-low when compared with June – signals a likely resumption of the 2023 up-trend.
Neither camp can say with any certainty what the price of bitcoin will do in the coming weeks and months. Thus, as before, the best way to profit from a bitcoin position is to hold it for the long-term.
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