In the aftermath of the crypto carnage on Aug. 5, short term holders of assets are glaring at their largest unrealized loss since the collapse of Sam Bankman-Fried led FTX in November 2022, according to a report.
What Happened: The Bank of Japan's unexpected interest rate hike led to a massive unwinding of the yen carry trade, causing ripple effects across international markets.
Bitcoin BTC/USD, the market's leading cryptocurrency, dropped by almost 19%, while Ethereum ETH/USD faced a more severe loss, falling by nearly 25%.
The current market stress has imposed serious investor stress on participants, a Glassnode report states.
The report further states that just 7% of short-term holder supply is currently held in a profitable position.
This is more than one standard deviation below the long-term average, “and suggests a notable degree of financial stress amongst recent buyers.”
The market’s reaction to the price decline has been swift and severe.
$1.38 billion in realized losses were incurred during the sell-off, with short-term holders accounting for 97% of these losses, indicating a panic-driven selling spree among newer investors.
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The report further states that as Bitcoin’s price dropped by 32% from its highest point, investors are now focusing on key price levels to see if it will recover.
The True-Market Mean ($45,900) and Active Investor Price ($51,200) are important markers.
According to Glassnode, the market found support around the Active Investor Price, indicating that long-term investors are buying at this level. However, if Bitcoin’s price falls significantly below these points, it could mean that the bullish market trend might be over.
The True-Market Mean is the average price at which active Bitcoin investors hold their coins, excluding long-dormant coins.
The Active Investor Price represents the average price paid by investors actively trading within the current market cycle.
What’s Next: Benzinga’s Future of Digital Assets event on Nov. 19 will no discuss the fallout from the FTX collapse and the steps needed to restore trust and confidence in the cryptocurrency market.
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