Short-term holders fall into losses as Bitcoin posts lowest weekly close since August

• Intensifying weekend selling drove Bitcoin below $75,000, leaving it with its weakest weekly close since August.
• Unrealised losses emerged among short-term holders as Bitcoin's realised profit-to-loss ratio slid to -0.63.
• Neither long liquidations nor reduced market exposure brought futures open interest down from an elevated $37 billion.

Selling pressure left recent Bitcoin (BTC) buyers nursing losses as the cryptocurrency slipped below $75,000 on Tuesday, following its weakest weekly close since August.

How much pressure are short-term holders facing as Bitcoin falls?

With prices continuing to slide, investors who bought Bitcoin during the recent recovery are coming under increasing pressure. Monday’s Glassnode Market Pulse shows short-term holders (STHs) nearing their break-even levels, alongside an increase in realised losses relative to profits.

Over the past seven days, the share of Bitcoin's circulating supply held in profit fell by 3.8% to 60.6%, Glassnode's profit and loss indicators reveal.

The erosion of unrealised gains as Bitcoin weakened was also evident in Net Unrealized Profit/Loss (NUPL), which fell from 3.4% to 1.1%. Short-term holders were collectively sitting on a small unrealised loss by Sunday.

Investors were also booking substantially greater losses than profits, with the realised profit-to-loss ratio declining from -0.21 to -0.63.

Glassnode described the shift as follows: “Loss realization now clearly dominates, a sign of fear-driven selling, although the reading has not reached its low band,”

Why is leverage still elevated after liquidations?

Stress was also evident in Bitcoin's derivatives market, where the recent sell-off has yet to fully flush out leveraged positions.

Position closures during Thursday's fall, followed by further long liquidations on Sunday, accounted for the reduction in futures open interest, according to Glassnode. Over the past week, open interest eased 1.1%, from $37.4 billion to $37 billion.

Even after that reduction, open interest is close to the upper end of its historical range, pointing to substantial leverage remaining in the market.

A 7.1% fall in long-side funding payments, from $3.1 million to $2.9 million, still left them above their upper historical band.

Bullish traders are still paying a sizeable premium to retain perpetual futures positions despite Bitcoin's recent weakness, Glassnode noted. Leveraged positioning therefore continues to lean towards the long side.

Greater caution among market participants is evident in options positioning as well.

Glassnode offered this assessment: “Options still price more turbulence than the market delivers, but the gap has narrowed sharply, so option buyers now pay a smaller premium over realized moves than last week,”

Why is spot demand unable to absorb the selling?

A lack of demand amid renewed market pressure was evident in Bitcoin's swift slide to $75,000. From $6.6 million a week earlier, spot cumulative volume delta (CVD) dropped to -$91.8 million. At the same time, spot trading volume rose 13.3% to $6.4 billion, signalling heavier activity during the week's price fluctuations.

Outflows from US spot Bitcoin ETFs occurred on four of the five trading days, taking the weekly total to its largest since early July.

Yet Glassnode noted a recovery in Bitcoin's price momentum from below its lower historical band. Momentum finished the week marginally higher, even as the leading cryptocurrency set a fresh low.

The report characterised the divergence as follows: “Momentum stays weak, but it no longer confirms the decline, a sign that the selling has lost some of its force,”

At the time of writing, BTC trades at $74,700, a decline of 0.1% over the past 24 hours.