- Bitcoin’s current price is now below the average purchase price paid by short-term holders over the past 155 days, potentially causing panic due to unrealized losses.
- The recent price drop saw Bitcoin hit its lowest level since February, with the price briefly plummeting 8% below a key support level to $56,814 on May 1.
- While holding an unrealized loss is not ideal, breaking the short-term holder cost basis is not the end of the bull market and has been recoverable in the past, according to an on-chain analyst.
The bitcoin price has fallen below the average cost paid by short-term holders, potentially causing some to panic sell due to unrealized losses. However, analysts say this dip is recoverable and doesn’t necessarily signal the end of the bull run.
What Caused the Recent Bitcoin Price Drop?
Bitcoin dropped around 4% in the last 24 hours to below $57,500. The sharp downturn led to over $1 billion in long positions being liquidated. The sell-off was driven by anticipation of the Federal Reserve’s interest rate decision, which kept rates unchanged as expected.
How Does This Affect Short-Term Holders?
Short-term holders, or those who have held bitcoin for less than 155 days, paid an average price of around $59,600 per bitcoin. With the current price around $57,500, these buyers now have an average 3% unrealized loss. According to analyst James Check, these recent buyers are the most likely to panic sell.
Is This the End of the Bull Run?
While unpleasant, analysts say this dip below the short-term holder cost basis does not necessarily mean the bull market is over. The bitcoin price has recovered quickly from similar dips below the cost basis in the past. Sustained trading below the cost basis could happen in a continued bull market as well.
The Path Forward
A quick bounce back above the average cost basis around $59,6oo would be a bullish signal, showing similarities to price action in June 2021. Even if the price remains volatile below the cost basis for some time, analysts are not ready to call an end to the bull market yet.
Conclusion
The latest bitcoin price drop has pushed the price below what many short-term holders paid on average. While this could cause some to panic sell, analysts say the bull market likely still has room to run. Sustained prices below the cost basis have happened before on the way up to new highs.
