Bitcoin price action over the past two weeks has reiterated its volatile nature despite the steady flow of institutional money. The cryptocurrency rose from $53,500 to a high of $66,000 in the final days of September. only to pull back to $61,000 in the first few days of October, which shows its unpredictable nature.
Interestingly, Bitcoin’s rally to $66,000 has led to a change in investment dynamics among the holder cohorts. Furthermore, this change in dynamics shows that the reversal and retest occurs after the rally not entirely bad news for the price of Bitcoin. In fact, this shift suggests that the pullback could set the stage for more resilient long-term price prospects for Bitcoin.
Bitcoin’s rejection at $66,000
Bitcoin’s recent break above $66,000 last week led to the creation of the first higher peak since June. This remarkable Bitcoin development was noticed by on-chain analytics platform Glassnode in a recent report. Bitcoin, which initially created a higher low of $53,000 in September, eventually broke above the August high of $64,500. According to the report, creating this higher high led to a change in the profitability of the cohorts of holders in the short and long term, with many more bitcoins reaching the long-term threshold.
In particular, the recent rally has seen many coins acquire near the all-time high of $73,780, which has now been held for over 155 days. This in turn has meant that many of these loss-making coins are now moving to long-term holder status. Although only 6.54% of long-term holders suffer losses, they are responsible for 47.4% of all coins that suffer losses. While this may not bode well for these long-term holders right now, Glassnode notes that this is actually common during reaccumulation phasesas seen in the periods 2013, 2019 and 2021. History shows that these have often led to price increases.
On the other hand, profitability among short-term investors has improved dramatically. Data from Glassnode shows that a significant number of coins still in the short-term cohort have a cost base between $53,000 and $66,000. Interestingly, the latest rally has pushed the profitability of short-term bond offerings to over 62%. It is striking that the volumes of profit taking are now 14.17 times greater than those of loss taking. As such, the financial pressure on short-term holders has now been eased, and many of them now have incentives to continue holding.
What next for Bitcoin?
Despite Bitcoin’s recent price move to $66,000, the cryptocurrency is in a stronger and more profitable position for investors across the board compared to where it was just a month ago. Moreover, the rejection of $66,000 has given new impetus to investors, especially long-term holders opportunity to supplement their assets.
At the time of writing, Bitcoin is trading at $61,200.
Featured image created with Dall.E, chart from Tradingview.com