Bitcoin Faces Pressures Amid Market Volatility and Investor Sentiment

By: Eva Baxter

Bitcoin short-term holders have been encountering significant financial pressures amid the current market volatility, realizing hefty losses averaging $0.48 billion daily. On-chain analytics firm Glassnode disclosed that the negative Net Realized Profit/Loss experienced by this investor cohort is a reflection of the market's downtrend. Short-term holders, defined as those who have acquired Bitcoin during the past 155 days, have been particularly susceptible to panic selling following the recent price drawdown. This capitulation phase has persisted despite a brief market uptick in January, pushing the 7-day exponential moving average (EMA) of realized profits into a deep negative territory.

The data provided by Glassnode shows that on February 6th, the net loss for short-term holders had plummeted to -$1.24 billion per day, marking a stark decline from previous observations. Although there has been a slight recovery, with current figures showing a net loss of -$0.48 billion per day, the analytics firm emphasized that market sentiment remains under pressure. Participants continue to display reduced confidence, an aspect that keeps the market in what Glassnode terms the 'base formation phase,' indicating ongoing capitulation.

Additionally, the Coinbase Premium Gap, an indicator that tracks the price differential between Bitcoin's value on Coinbase (USD pair) vis-a-vis Binance (USDT pair), has also been negative. The negative trend observed indicates that Coinbase users, who predominantly comprise US investors and institutional clients, have exerted increased selling pressure. The sustained negative values in the Coinbase Premium Gap suggest a lack of significant demand for Bitcoin among these investors, a phenomenon that has been present since mid-December.

Market experts attribute the approximate 50% drop from Bitcoin's October peak to what they have labeled a 'macro shock' within an overleveraged market rather than a cycle breakdown. The current trading value around the $64,000 mark amid these dynamics reflects the broader uncertainties as investors recalibrate their positions in response to the macroeconomic factors at play. Institutional interest remains a pivotal element in determining future price trajectories, contingent on shifts in broader economic expectations.