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Bitcoin is currently on a turnaround path after a recent price correction that brought the price all the way down to $52k a few days ago. Though the king coin seems to have recovered in a relatively short period of time and now trades in the $55k price range, the latest price decline has had differing effects on BTC’s long-term and short-term buyers.
This put new entrants into BTC’s market in a precarious position, despite the coin’s relatively high price point. Hence, for traders in the current market, understanding how the coin’s recent price action has impacted its investors is quite insightful in determining the current market sentiment.
According to Glassnode numbers, some Bitcoin’s new coin holders were shook out at a loss during the recent dip. The Short Term Holder (STH) SOPR metric is now just below 1.0, and as compared to the coin’s market activity over the last year, this is the most noticeable drop since BTC dropped to $29k in January.
However, in the case of the above metric, it is important to note that this metric tracks the amount of benefit (> 1.0) or loss (1.0) realised by coins expended on-chain and only takes into account new entrants who carry coins older than 155 days.
In contrast, the situation for Bitcoin’s long-term holders was very different, and as the market grows and moves into the post-correction turnaround process, attractive conditions are expected to re-emerge for both short-term and long-term buyers. In comparison to short-term buyers, the latest price correction did not destabilise long-term investors, according to Glassnode. It said,
“Intermittent spikes in LTH-SOPR indicate profits were realised by long term holders which can increase the liquid supply, as dormant coins are re-activated in to circulation.”
Bitcoin’s valuation has dropped significantly in the last five days, with its exchange price falling by almost 14 percent. What was important to notice was that there was no panic sale in the case of long-term traders, and they seem to be hanging onto their tokens, which has also stopped bearish pressure on BTC and might even help it regain its losses.
Given that the market is currently facing a sharp price downturn, there are a number of important reasons for traders to remember, as they affect long-term and short-term traders differently, as highlighted above.
In this respect, looking at Bitcoin’s Coin Days Destroyed and Dormancy will provide more insight into what the economy is going through right now. Both metrics are now within a reasonably steady band that has been in place since mid-January. According to Glassnode, “strong continuation to the upside may indicate older coins are beginning to take significant profits.”
This may also mean that if long-term investors continue to sell often, BTC will experience a delayed continuation of its uptrend in the coming months. Though many expect BTC to reach the $100k price range before the end of 2021, price corrections and panic-sells by long-term holders of the coin can undermine the bull rally as it progresses.