Bitcoin Realized Losses Hit Levels Last Seen Since the FTX Crash in a STH-Driven Sell-off

Short-term holders are driving Bitcoin sell-offs, pushing realized losses to levels last seen since the FTX exchange crash in November 2022.

Bitcoin briefly reached $80,000 today, as it continues to flirt with lower prices. BTC capsized to the low earlier, marking an over 8% correction in the past 24 hours alone, before a rebound to trade at $84,780.

Impatient Short-Term Holders Dump Bitcoin Holdings

Meanwhile, the retracement has impacted short-term holders (STHs) the most. For context, wallets in this category are those that have held Bitcoin for less than 155 days, according to Glassnode. 

Notably, CoinMarketCap data shows that BTC has now corrected by 14% over the past year, putting most holders in this category at a significant portfolio drawdown. Instead of weathering the storms, these STHs have taken to realizing losses.

Glassnode data today confirmed this, with the market intelligence platform noting that the trend has reached insane levels. Specifically, realized Bitcoin losses have surged to heights last seen since the FTX implosion in November 2022, driven mainly by FUD among short-term holders.

An accompanying 7-day moving average chart highlights that over $800 million in losses have been realized, surpassing the over $600 million seen during the April market crash. The last time this large amount was sold at a loss was when the Sam Bankman-Fried-founded exchange collapsed, sparking a panic that led to over $1.2 billion in realized losses for both long and short-term BTC investors.

Crypto Market Unwinding

Glassnode noted that the scale and speed of these realized losses indicate an ongoing marginal demand washout, with investors unwinding their exposure to the crypto market. This process has separated paper hands from diamond hands, particularly as most of the panic has come from STHs.

Meanwhile, these short-term holder-dominated sell-offs might be a good sign for Bitcoin. With long-term investors remaining calm under such circumstances, it reassures their commitment and confidence in the asset’s near-term and future price trajectory.

Bottom Signal?

Remarkably, investor panic in this manner has historically marked Bitcoin’s bottom. The last two times BTC recorded this level of selloffs, its price rebounded sharply to record highs.

For perspective, Bitcoin bottomed in November 2022 following the FTX crash. From a low of $15,470, the crypto leader reclaimed its November 2021 peak of $69,000 by March 2024 and extended the run to six-figure valuations.

Again, the April crash saw Bitcoin dip to $74,441, but the token didn’t stay there for long. During the same month, it recovered to $95,000 and continued to rise, reaching its October all-time high of $126,220.

These historical precedents have strengthened convictions that Bitcoin could rebound from recent lows to target new highs in the near term. Whales have also begun buying massive amounts of Bitcoin, fueling the reversal narrative.