Bitcoin (BTC) Short-Term Holder Realized Loss Has Hit High Levels Recently

On-chain data shows the Bitcoin short-term holders have recently participated in the largest loss-taking event of the current cycle.

In its latest weekly report, on-chain analytics firm Glassnode has discussed how the situation of the Bitcoin short-term holders has changed following the market downturn.

The “short-term holders” (STHs) are the BTC investors who purchased their coins within the past 155 days. This cohort includes the new entrants into the market, who don’t tend to be too resolute. As such, it’s not uncommon to see the group participating in a panic selloff, whenever some kind of volatility emerges in the market.

The recent price decline has been one such moment. First, here is a chart shared by the analytics firm that shows how the Relative Unrealized Loss of the STHs has developed during this event:

The “Relative Unrealized Loss” measures, as its name suggests, the total amount of loss that the STHs are holding onto. The ‘relative’ in the indicator’s name refers to the fact that this loss has been normalized according to the market cap.

As is visible in the graph, the Bitcoin STH Relative Unrealized Loss has observed a significant increase recently and has reached the upper threshold for losses recorded in bull markets historically (the red line).

Glassnode notes, though, “despite these elevated paper losses, the financial damage carried by new investors remains largely in line with the yen-carry-trade unwind on 5-Aug-2024.”

As long as an investor keeps sitting on their loss, it remains unrealized, but once they decide to make a transaction involving the underwater tokens, the loss is said to be ‘realized.’

Given that a portion of the group has been pushed underwater in the latest crash, it would be expected that the fickle-minded members of it would have capitulated at some loss. Here is another chart, this time for the loss that the STHs have actually realized:

As displayed in the above graph, the 30-day sum of the Bitcoin STH Realized Loss has reached the $7 billion mark recently, which is the highest value witnessed in the current cycle so far.

It’s also apparent from the chart, however, that while these losses are sizeable on their own, the same isn’t the case when stacked against the major capitulation events of the previous cycle.

In the loss-taking event that followed the May 2021 selloff, the indicator’s value reached $19.8 billion. Similarly, it reached a high of $20.7 billion during the 2022 bear market. Both of these are clearly much larger in scale than the latest capitulation.