Long-term Bitcoin holders face increasing stress as prices drop to $60,000, reflecting behavioral shifts typical of bear markets.
Bitcoin's recent decline to $60,000 has raised concerns among long-term holders (LTH), mirroring the psychological strain seen during the Terra (LUNA) collapse in May 2022, according to analysts at Glassnode.
The seven-day Exponential Moving Average (EMA) of the Spent Output Profit Ratio (SOPR) for LTH has fallen below 1, indicating these investors are starting to sell their holdings at significant losses. This is an unusual behavior typically observed in the later stages of bear markets.
Market reactions to prior downturns, like those following Terra and FTX's failures, suggest a stronger demand response than what is currently seen. Although there has been some accumulation around the recent $60,000 price, the demand remains much weaker than after the LUNA collapse.
“Long-term holders are beginning to show early signs of stress amid this correction,” analyst Darkfost noted. He added that the current SOPR for LTH stands at 0.88, with historical lows during prolonged downturns observed at around 0.5.
Despite this, he emphasized that a definitive trend hasn’t formed yet, as the monthly average of the SOPR is still at 1.09. Darkfost indicated that these early signs of waning sentiment might either lessen if stability returns or escalate if selling pressure continues.
Liquidity Issues Persist
Darkfost also highlighted that Binance has experienced three consecutive months of negative stablecoin net flows, which points to a continued tightening of liquidity in the crypto market. In December, $1.8 billion was withdrawn, escalating to $2.9 billion in January and $3 billion so far in February, a trend reminiscent of the 2023 bear market.
“This sustained decline in reserves indicates weakening demand and a more defensive stance among investors,” Darkfost stated.
Adding to the market’s concerning dynamics, open interest in Bitcoin on Binance has dropped by 20% over the last two weeks, despite a 20% rise in price during that same period. Analyst Ardi noted there hasn't been an influx of new capital, making it likely that any price increases are merely a series of short position liquidations.
Bitcoin is currently trading at around $68,100, reflecting a 1.3% decrease over the past 24 hours. Some analysts, including Bloomberg Intelligence's Mike McGlone, have maintained a forecast of a potential drop to $10,000 for Bitcoin.
