Almost all short-term Bitcoin investors found themselves in paper losses, which led to a change in sentiment. According to Glassnode, this is the first time since the FTX collapse that this group is showing signs of panic.
With almost all #Bitcoin Short-Term Holders are now underwater on their position, sentiment has shifted towards the negative.
— glassnode (@glassnode) September 18, 2023
In this report, we explore several measures to track investor sentiment. We develop indicators which assess divergences between the market and observed… pic.twitter.com/DcD5ULIPwy
Against the backdrop of a sharp rollback of the rate from $26,000, over 97.5% of the coins at the disposal of speculators turned out to be unprofitable. When the metric reaches such values, the likelihood of approaching the peak of sales increases exponentially, experts noted.
The MVRV and SOPR indicators, when applied to short-term investors, confirm the observation that historically peak sales with the greatest relative losses occurred at significant price lows.
Such calculations are necessary to assess the ebb and flow of the changing sentiments of new market participants. It is based on an analysis of the deviation between the costs of two subgroups: hodlers and coin spenders:
🟥negative sentiments arise when the cost of bitcoins for “spenders” is higher than for holders;
🟩 positive moods are in the opposite situation.
Since mid-August, the first regime has formed in the market – the near future will be characterized by a certain degree of panic and negative sentiment, experts explained.
For better visualization of the indicator, analysts normalized it by the spot price.
The range of fluctuations of the metric is limited by extremes from -0.25 to 0.25, with rare jumps beyond the range at the market turning point. As a neutral corridor (🟧), experts chose values from -0.05 to 0.05.
Negative sentiment intervals during bear market recoveries typically last between 1.5 and 3.5 months, they pointed out. The current period is 20 days (as of September 17).
Analysts suggested considering two models as a potential “bottom”:
🟢 Investor price ($17,600). It reflects the average cost of purchasing all coins. Bitcoins at the disposal of miners are excluded from the sample.
🟣 Delta price ($11,100). It is a combined on-chain and technical analysis model often used to model the bottom of cycles.
The chart below shows how the price of the first cryptocurrency recovered from these levels in previous bearish phases.
In addition, analysts suggested using compression and expansion between these price patterns as an indicator of the recovery phase.
This spread will narrow near the tops of the cycle as more capital enters the market. Conversely, a divergence indicates a weakening of its inflow when the driving factor is a decline in quotations.
Compression = (Investor Price – Delta Price)/Spot Price
The model can be used to track the transition from the deepest phase of a bear market back to its recovery. The graph below shows that the prevailing structure is similar in nature to the compression phase observed in 2016 and 2019, experts emphasized.
To assess capital flows, analysts also used the RHODL Ratio. They applied a two-year median (half a cycle) 🔵 as a threshold for periods when modes of movement move from a bullish to a bearish market structure.
“By this indicator, 2023 saw a modest influx of new investors. The metric is just approaching the two-year average. The influx of participants is positive, but relatively weak in dynamics,” – the experts explained.
“Several metrics confirm the ongoing uncertainty. The latter is due to the macroeconomic background, pressure from regulators and limited liquidity in all markets,” — the analysts summarized.
Previously, BitMEX co-founder Arthur Hayes admitted a possible short-term departure of Bitcoin below $20,000 followed by a new bullish impulse. However, in September, he pointed to the positive prospects of the first cryptocurrency, contrary to politics Fed.
Recall that the founder of Edelman Financial Engines, Rick Edelman, predicted an increase in the price of digital gold to $150,000 by the summer of 2025.