Bitcoin

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Bitcoin&nbsp;is now trading below the average purchase price paid by short-term holders, potentially causing “panic” due to unrealized losses, according to an on-chain analyst.
“These recent buyers are statistically the most likely to panic,” analyst James Check, known as “Checkmatey,” <a href="https://newsletter.checkonchain.com/p/bitcoin-bull-market-blues" target="_blank" rel="noopener nofollow">said</a> in a May 1 report.
“What a nuke we have on our hands to open the month of May,” Check added, referring to Bitcoin (<a href="https://cointelegraph.com/bitcoin-price">BTC</a>)&nbsp;briefly plummeting 8% below a key support level to $56,814 on May 1, <a href="https://coinmarketcap.com/currencies/bitcoin/" target="_blank" rel="noopener nofollow">according</a> to CoinMarketCap data.
The recent price drop saw Bitcoin hit its lowest level since February, which is significant for short-term Bitcoin holders — those who have held for under 155 days — as they paid an average price of $59,600 per Bitcoin.
Even though the price has slightly recovered to $57,631 at the time of publication, short-term holders still hold an average 3% unrealized loss.
Bitcoin’s price at the time of writing represents a decline of 4% in the past 24 hours. The sharp downturn led to the liquidation of $100.27 million in long positions over that time, <a href="https://www.coinglass.com/LiquidationData" target="_blank" rel="noopener nofollow">according</a> to CoinGlass data.
Its price decline was driven by a <a href="https://cointelegraph.com/news/why-is-the-crypto-market-down-today">crypto sell-off as market participants</a> awaited the United States Federal Reserve’s interest rate decision, which kept the current high interest rates unchanged, as analysts <a href="https://twitter.com/KobeissiLetter/status/1785731848020152602" target="_blank" rel="noopener nofollow">expected</a>.
<figure data-ct-non-breakable="true">
 <img src="https://s3.cointelegraph.com/uploads/2024-05/731bca5c-111f-406d-8206-a3f6dda567f7.png" alt="" title="">
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 Bitcoin’s price briefly plummeted to its lowest price in three months on May 1. Source: CoinMarketCap
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Check suggested that while holding an unrealized loss is not ideal, short-term Bitcoin holders have experienced this before.
“Most importantly, breaking the [short-term holder] cost basis isn’t the end of the world, nor the end of the bull market. It doesn’t help…but it is and has been recoverable,” he wrote.
Related: <a href="https://cointelegraph.com/news/bitcoin-sub-60k-after-daily-crypto-liquidations-near-300m">Bitcoin sub-$60K levels in focus after daily crypto liquidations near $300M</a>
The short-term holder cost basis typically acts as support during bull periods and resistance during bear periods, <a href="https://twitter.com/OnChainCollege/status/1785670627451433221" target="_blank" rel="noopener nofollow">explained</a> crypto trading resource On-Chain College in a May 1 X post.
However, it pointed to a few potential events that will not signal “the bull market is over.”
A “quick move” to $59,600, roughly 2.2% above Bitcoin’s current price, would be “bullish,” the On-Chain College claimed.
This is based on a similar pattern in June 2023, when the price dropped below cost basis and quickly rebounded before a significant upswing.
<figure data-ct-non-breakable="true">
 <img src="https://s3.cointelegraph.com/uploads/2024-05/176dabc3-e8cf-45b7-96b6-6c50d3c39c83.png" alt="" title="">
 <figcaption style="text-align: center;">
 Bitcoin’s price breaks below the short-term holder cost basis. Source: Checkonchain
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On-Chain College also noted that when Bitcoin’s price pulled back a few months later, in August 2023, it stayed volatile below the short-term cost basis for some time.&nbsp;
This suggests that a “sustained period” below the cost basis could also signal a bullish trend, according to On-chain College.
Magazine: <a href="https://cointelegraph.com/magazine/meme-coins-betrayal-crypto-ideals-or-true-purpose/">Memecoins: Betrayal of crypto’s ideals… or its true purpose?</a>
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin 4% dip may ‘panic’ short-term holders as price falls below average cost

Cointelegraph

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