Bitcoin: Is this cohort to blame for BTC’s correction?

• BTC’s decline from the $44,000 price level was due to its short-term holders.
• The demand for BTC worsened, as the price cratered by almost 10% in the last week.

Bitcoin’s [BTC] upward momentum above the $44,000 price mark hit a wall last week, suggesting a potential shift in investor sentiment, especially the coin’s short-term holders (STHs), Glassnode found in a new report.

The short-term holders are to blame

The on-chain data provider assessed the coin’s STH-Supply Profit/Loss Ratio. This metric, which measures how much profit or loss BTC STHs are making, helps spot when these investors are scared (selling too much) or greedy (buying too much).

Historically, a Profit/Loss ratio above 20 indicates overheating conditions, below 0.05 suggests oversold conditions and around 1.0 signifies a break-even point.

When the market rally began in October, the STH-Supply Profit/Loss Ratio rallied above 20,

“Which signals a higher-risk structure and a similar ‘overheated’ condition to the NTV-Premium indicator.”

As the overheated market conditions pushed BTC’s price above $44,000, it sparked a wave of profit-taking activity from investors who have held the coin for less than six months.

Glassnode stated,

“This week’s rally to $44.2k provoked a high degree of STH profit-taking activity, suggesting this cohort acted upon their paper gains, taking advantage of demand liquidity.” 

Source: Glassnode

Further, Glassnode added that during periods of significant sell-offs in the market, BTC STHs tend to experience significant losses.

“This signals when investors panic and send recently acquired coins back to exchanges for disposal at a loss.”

It indicates heightened distress and reactive selling behavior among investors during significant market downturns.

Based on the combined insights from BTC’s STH-Supply Profit/Loss Ratio, NTV-Premium indicators, and the Realized Profit/Loss Ratio, Glassnode concluded,

“As we can see, the recent rally to $44.2k was accompanied by a statistically meaningful degree of profit-taking by STHs… We can see a confluence of factors suggesting a potential saturation of demand (exhaustion) may be in play.”

Source: Glassnode

Read Bitcoin’s [BTC] Price Prediction 2023-24

BTC’s current setup

At press time, the leading coin exchanged hands at $41,162. In the last week, BTC’s value has declined by almost 10%, according to data from

Trading activity observed on a 12-hour chart showed that key momentum indicators had slipped under their respective center lines at press time. This suggested that BTC accumulation dwindled while coin sell-offs gained momentum. 

Source: BTC/USDT on TradingView