Bitcoin (BTC) has taken a tumble in recent days, raising anxieties about a potential extended decline. The leading cryptocurrency has shed over 5.5% in the past week, reaching a six-week low of $58,400 on June 25th. This drop coincides with a crucial technical indicator suggesting a steeper correction may be on the horizon.
Market intelligence firm Glassnode, in its “Week On-chain” report, highlighted that Bitcoin’s price has dipped below the average acquisition price, or “cost basis,” of short-term holders (those holding for less than 155 days). This metric, historically, has correlated with periods of declining investor confidence and deeper market corrections.
“Since mid-June,” Glassnode noted, “the spot price has fallen below the cost basis of both short-term and mid-term holders, signifying a potential deterioration of investor sentiment.” The data further reveals that Bitcoin breached the $64,000 mark on June 23rd, falling below the short-term holder cost basis of $64,591 at the time. This price point served as a critical support level, and its break raises concerns about a more severe decline.
While the immediate support level held, the recent sell-off brought Bitcoin dangerously close to the cost basis of holders who’ve invested between 3-6 months ($57,300). Notably, this long-term holder cost basis continues to rise despite the price drop, indicating these investors are holding firm.
Another noteworthy observation by Glassnode is the “diminishing momentum in the demand side,” evidenced by the cost basis of short-term holders falling below that of mid-term holders. This suggests a potential “net capital outflow from the asset,” where more investors are selling than buying. The report highlights a similar pattern occurring in previous bull markets, raising concerns about a prolonged downturn.
Spot Bitcoin ETFs See Mixed Signals
There’s a glimmer of hope amidst the bearish sentiment. Spot Bitcoin exchange-traded funds (ETFs) in the United States witnessed a minor uptick in inflows on June 25th, totaling $31 million. This snapped a seven-day streak of outflows.
Also Read: Crypto Market Blues: Will Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) Bounce Back?
Data from SoSo Values shows that Fidelity’s FBTC ETF led the inflows with $49 million, followed by Bitwise Bitcoin ETF (BITB) at $15 million, and VanEck Bitcoin Trust ETF (HODL) at $4 million. However, Grayscale’s GBTC ETF saw a significant outflow of $30.2 million, while ARK 21Shares Bitcoin ETF reported net outflows of $6 million.
Despite the recent inflows, spot Bitcoin ETFs have experienced substantial outflows in the past few weeks, the highest since April when they surpassed $1.2 billion in net outflows.
The Road Ahead for Bitcoin
The coming days will be crucial for Bitcoin. The price dipping below the short-term holder cost basis is a cause for concern, and whether it triggers a deeper correction or a bounce back remains to be seen. The mixed signals from spot Bitcoin ETFs further add to the uncertainty. Investors are closely watching these developments, with some potentially seeking safer havens and others waiting for a potential buying opportunity.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
About The Author
