Investor Confidence Slides as Short-Term Holders Face Losses

In a recent report from Glassnode Insights, it is pointed out that the cryptocurrency market‘s sentiment has taken a negative turn as a significant portion of Short-Term Holders (STH) find themselves in a losing position. The report implies a suggestion that the market is experiencing an early-stage shift in market psychology and confidence.

With almost all #Bitcoin Short-Term Holders now underwater on their position, sentiment has shifted towards the negative.

In this report, we explore several measures to track investor sentiment. We develop indicators which assess divergences between the market and observed… pic.twitter.com/DcD5ULIPwy
— glassnode (@glassnode) September 18, 2023

The report analyzes two on-chain pricing models – Investor Price ($17.6k) and Delta Price ($11.1k), both of which have historical significance during market lows. The report read:

Price action across both the 2018-19 and 2022-23 cycles spent a similar amount of time trading within the bounds of these price models at the lows. Of note is that the market revisited the Investor Price level during the chaos of the March 2020 sell-off.

The Realized HODL Ratio (RHODL) is used to track the balance of invested wealth between recently moved coins and long-term HODLers. The report suggested that while there has been a modest influx of new investors in 2023, the RHODL Ratio remains relatively weak, indicating a soft inflow of capital.

The 2023 market rally was driven by significant accumulation especially when the price of Bitcoin reached levels above $30,000, suggesting FOMO (Fear of Missing Out) among investors. This contrasts with capitulation events, when investors, often driven by fear or panic, sold off their holdings in late 2022, but new investors accumulated at lower prices.

A substantial proportion of Short-Term Holders are now holding coins at a loss, reaching the deepest level since a significant market event in the past. Metrics like STH-MVRV and STH-SOPR are explored and are assessed relative to certain boundaries, including a 155-day average, an Upper Band, and a Lower Band.

Glassnode shed light on the large profits and losses experienced by the investors, stating,

We can see that several of the recent market highs and lows occurred alongside significant deviations outside these boundaries. This indicates that recent investors were in a statistically large degree of profit or loss at the time.

Clearly, the crypto market is undergoing a notable shift in sentiment, driven by the majority of Short-Term Holders facing losses. This shift suggests uncertainty in macroeconomic conditions,regulatory pressures, and liquidity tightness across markets.