In recent days, Bitcoin has struggled with maintaining its upward momentum, facing increasing selling pressure from holders and subsequently dipping to $27,000. This decline was further accelerated by bearish news from the Federal Open Market Committee (FOMC). However, analysts caution that any forthcoming price surge may be short-lived, as short-term holders (STH) are ready to liquidate their positions should Bitcoin turn profitable, potentially bringing a steep drop following a surge.
STH NUPL Approaches Zero
According to on-chain analysis firm CryptoQuant, the Bitcoin ship may soon be navigating through turbulent waters as the Net Unrealized Profit Loss (NUPL) metric for short-term holders (STH) ominously approaches zero. The trend of this critical metric offers an outlook of potential market movements, revealing a scenario where short-term holders might soon be compelled to sell, thereby exerting significant pressure on Bitcoin prices.
The STH NUPL metric provides the financial behavior and potential actions of short-term Bitcoin holders. When the STH NUPL values above 0, it signals that STHs can realize a profit by selling their coins, given that the current market price surpasses the average price at which they acquired their assets. Conversely, values below 0 suggest potential losses for STHs should they decide to sell, as the current market price dips below their average acquisition price.
Recent observations reveal that the STH NUPL is inching closer to zero, currently hovering at -0.024. This scenario suggests that the average acquisition price of assets by the STH cohort is nearly equal to the current market price, indicating a lack of significant unrealized profits or losses for this group. As the Bitcoin price surges and the STH NUPL metric concurrently rises, the market may soon find itself under substantial selling pressure. This level, roaming around the brink of profit and loss, becomes a critical juncture for the market, as numerous participants may seek to lock in profits before the tides turn.
Bitcoin Traders Will Soon Lose Patience
Yesterday, the Federal Open Market Committee (FOMC) indicated a robust stance on its ‘restrictive’ monetary policy in the face of rising inflation. Minutes from the latest meeting reveal a dedication to upholding increasing interest rates for “some time,” or until inflation exhibits signs of decelerating. Subsequent to this announcement, Bitcoin’s price experienced a downturn, dropping to a low of $26,500.
Coinglass data reveals a sharp increase in long-liquidation after Bitcoin dropped from $27K. The amount of long liquidation surpassed $13 million as buyers lost patience. However, as the price is now preparing for a recovery rally following an accumulation near the dip, over $2 million worth of short-positions were liquidated. This suggests a battle between the bulls and bears as sellers are capitalizing near resistance levels and buyers are purchasing Bitcoin at a low price near the dip to ride on a minor upward surge.
Currently, the approach of the STH NUPL towards zero paints a picture of a “balanced” market state for short-term holders, where unrealized profits and losses are minimized, and the average acquisition price of assets aligns with the current market price. However, this balance is fragile and may be disrupted as the STH NUPL ascends above 0, likely triggering a wave of selling pressure from short-term holders looking to capitalize on emerging profit opportunities.
The long/short ratio has surged from its previous level as it hovers around $0.8748. Though the current momentum favors sellers, buyers gained confidence with the recent surge in the ratio. Sellers are now dominating the BTC futures market with 53% positions, and buyers are countering this resistance with 47% long positions.
