Bitcoin’s August $20,000 Pullback Leaves Short-Term Holders Squirming

Periods of widespread decline in global markets tend to be rare, occurring during times of significant global stress, deleveraging and heightened geopolitical risk.

On Monday, both stocks and digital assets saw strong selling as the yen trading shutdown caused the market to deleverage. US Treasuries rallied amid recession fears, and bitcoin fell 32% from its all-time high, marking the worst decline of the current cycle.

According to Glassnode, this pullback “precipitated a statistically significant capitulation among short-term holders.”

August affects short-term Bitcoin holders the most

Despite making a slight recovery above $57,000, Glassnode data suggests that short holders are now facing their biggest unrealized losses since the FTX collapse, highlighting the significant investor stress due to current market conditions.

“August has already been an exceptionally eventful month in both digital asset and equity markets after a ‘correlation-1’ event triggered a major market sell-off. Bitcoin recorded its biggest decline ( -32%) from the ATH of the cycle and precipitated a statistically significant capitulation among short-term holders.”

The blockchain intelligence platform also found that only 7% of its supply remains in a profitable position and is similar to the August 2023 sale.

The sell-off triggered a wave of investor panic, resulting in approximately $1.38 billion in realized losses. This is the thirteenth largest event in history in terms of dollars, according to Glassnode estimates. Notably, 97% of these losses were borne by short-term holders, while long-term holders were not affected.

It found that investors had reacted mainly with panic and fear, selling BTC significantly below their acquisition prices.

Additionally, the short-term holder’s SOPR also plummeted to “stunning depths,” with new investors suffering an average loss of 10%. This indicates a form of capitulation, with only 70 trading days recording a lower value.

Who stacks up?

Bitcoin whales have continued to accumulate significant amounts of the crypto asset over the past month despite the market slump. During this period, more than 404,448 BTC, worth $22.8 billion, have been moved to permanent holder addresses.

This was observed by CryptoQuant’s Ki Young Ju, who added that entities such as traditional financial institutions, companies or governments could announce major acquisitions of Bitcoin in the third quarter of 2024.

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