Bitcoin's Slump Deepens: STHs Face Losses, ETF Outflows Intensify
1min read Bitcoin's recent price drop has left short-term holders (STHs) with losses, raising concerns about whether the slump will continue. The cryptocurrency has fallen below the cost basis for sths, who have held BTC for less than 155 days. This decline has been exacerbated by heavy outflows from exchange-traded funds (ETFs), which could contribute to a continued downtrend.
The Bitcoin Fear and Greed Index has shown a reading of 26, indicating a fearful sentiment among investors. This is an improvement from the previous day's reading of 20, which denoted extreme fear. The index reflects the 13.8% drop in BTC's price over the past nine days.
Analyst Axel Adler, in a post on CryptoQuant, pointed out that STHs have seen modest losses due to the recent price drop. On average, they were at 6.4% below cost basis, which was approximately $90.5k according to CQ data. Adler observed that STHs experiencing modest losses could lead to a period of market consolidation and accumulation. However, this would require steady demand and a shift in macroeconomic sentiment, which remains fearful and uncertain.
The US spot ETF flows have shown heavy outflows over the past ten days, contributing to Bitcoin's losses over the past week. On the 28th of February, there were inflows worth $94.3 million, which was dwarfed by the $1.14 billion outflow on the 25th of February. Sentiment remains bearish, and further losses are possible in the near term.
The MVRV ratio, which is the market value divided by the realized value, has dropped below 1 for STHs. This indicates that holders are at a loss, as previously highlighted. In the previous cycle, after the BTC halving, the price did not drop below the STH cost basis until mid-May 2021. It went below the 1 standard deviation from the MVRV ratio and stayed there until July before recovering in August. A similar scenario may occur again, with Bitcoin potentially seeing more losses and trending downward in the coming weeks. The cryptocurrency could consolidate in the $65k-$70k region for a couple of months before recovery.
