Bitcoin’s Decline Leads to Loss of Unrealized Profits
The recent decline in Bitcoin (BTC) has resulted in a significant loss of unrealized profits, especially among short-term holders. This decrease in profits could potentially lead to increased selling pressure and further market correction, according to a report from Bitfinex.
Plummeting Unrealized Profits for Bitcoin
Since BTC fell below $43,000, more than half of the profits accumulated by short-term holders have been wiped out. Many investors who purchased BTC less than a month ago have exited their positions at a loss. This decline in average profits for short-term holders often precedes selling pressure and market corrections as investors try to minimize losses or secure remaining profits.
Sentiment Indicated by SOPR Metric
The Spent Output Profit Ratio (SOPR) is currently indicating a bearish sentiment. It compares the value of coins spent on a given day with their value at the time of creation to determine realized and unrealized profit and loss. With Bitcoin’s SOPR below one, sellers are offloading their coins at a loss.
“Given these dynamics, a considerable price correction even further down from current levels across the market would not be surprising…These levels are critical to watch, as they may determine BTC’s short-term price stability and market sentiment,” Bitfinex’s analysts said.
Possible Further Plunge in BTC Price
Bitfinex warns that the next support levels for BTC are estimated to be between $38,000 and $36,000. These levels closely align with the short-term holder’s realized price of $38,307. Currently trading at $40,000, which is 18% lower than its post-ETF approval high, analysts believe that a further price correction is likely due to the prevailing bearish sentiment in the market.
As previously reported, short-term holders’ unrealized profit margins may need to drop below 0% before a price bottom is reached and a BTC rally can be expected.
Hot Take: Bitcoin’s Decline in Unrealized Profits Signals Potential Market Correction
The recent decline in Bitcoin’s unrealized profits, particularly among short-term holders, suggests a potential market correction. As these investors exit their positions at a loss, selling pressure increases, leading to further downward movement in BTC price. The current sentiment, as indicated by the SOPR metric, shows that sellers are offloading their coins at a loss. Bitfinex warns of possible support levels between $38,000 and $36,000 and anticipates a further price correction due to the prevailing bearish sentiment. To expect a BTC rally, short-term holders’ unrealized profit margins may need to drop below 0%.
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