Bitcoin Short-Term Holder Profit/Loss Margin Spiked Before Crash
After Bitcoin’s recent surge above $45,000, the cryptocurrency has experienced a sharp crash, erasing its gains. Speculation about the cause of this sudden plunge has been circulating in the market, with some attributing it to rumors of the US SEC rejecting all BTC ETFs.
However, Julio Moreno, the head of research at CryptoQuant, suggests a different explanation. Moreno emphasizes the importance of analyzing on-chain data and believes that people should look beyond surface-level factors. He previously pointed out that the profit level of short-term Bitcoin holders had spiked when the coin broke past $40,000 last month.
In a chart shared by Moreno, it is evident that as Bitcoin rallied, it moved away from the realized price of short-term holders, leaving them with substantial unrealized profit. This pattern has historically coincided with significant local tops in the cryptocurrency’s price.
According to Moreno, this behavior can be attributed to short-term holders succumbing to profit-taking temptations as their gains increase. These sell-offs create resistance and impact the price. Moreno suggests that signs of overheating were already present when Bitcoin reached $40,000 and that the recent correction was brewing from an on-chain perspective.
BTC Price
Following the crash, Bitcoin has partially recovered and is currently trading around $43,400.
Hot Take: The Significance of On-Chain Data for Bitcoin Analysis
The recent crash in Bitcoin’s price has sparked various speculations about its cause. While some attribute it to rumors or external factors, the head of research at CryptoQuant highlights the importance of analyzing on-chain data. By examining the behavior of short-term holders and their profit/loss margin, valuable insights can be gained into the market sentiment and potential price movements.
This approach suggests that the recent correction was not entirely unexpected, as signs of overheating were already present when Bitcoin reached $40,000. Understanding these patterns and considering on-chain data can provide a deeper understanding of market dynamics and help anticipate future trends in the cryptocurrency space.
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