Summary:

On average, compared to the previous few cycles, the unrealized losses of BTC investors are relatively small, indicating a relatively favorable overall situation.

However, the unrealized losses of short-term holders are still quite high, indicating that they are the primary risk group.

· Profit and loss activities are still very few, key indicators such as the seller's risk ratio suggest that volatility may intensify in the near future.

Market Downturn

In the past six months, PA has been stagnant and investor sentiment has been low. However, significant changes have occurred in the past three months, with increased downward pressure leading to the most severe decline in the market this cycle.

However, from a macro perspective, the Spot price is currently about 22% lower than the historical high price, and the decline is relatively small compared to the historical Bull Market.

Current Market Pressure

As the downward pressure on prices increases, it is wise to assess the unrealized losses held by investors to assess the financial pressure they are experiencing.

From a broader market perspective, unrealized losses are still at historical lows. The total unrealized losses account for only 2.9% of BTC's Market Cap, which is at historical lows.

This indicates that overall investors can still be relatively profitable even in a situation of continued price decline.

If we take the ratio of unrealized total profits to unrealized total losses, we can see that profits are still six times the total losses, supporting the above observation. About 20% of trading days have higher ratios than the current value, highlighting the surprisingly robust financial condition of ordinary investors.

Short-term Worries

The short-term holder group representing new market demands seems to have taken on the majority of the market pressure. Their unrealized losses dominate and have been steadily increasing in scale over the past few months.

However, even for this group of people, their unrealized losses have not yet entered a full-scale Bear Market relative to the size of the Market Cap, but are closer to the turbulent year of 2019.

We can use the evaluation of the STH MVRV ratio to support the above observation, which has fallen below the breakeven value of 1.0. During the recovery Rebound period after the FTX failure, the trading levels of this indicator are similar to those in August 2023.

This tells us that ordinary new investors hold unrealized losses. Generally speaking, the market is expected to weaken further before the spot price recovers to the STH cost basis of 62,400 USD.

We can enhance confidence in this assessment by examining a subset of the investor population in the STH group. Currently, all age groups in the STH group hold unrealized losses, with the following average cost basis:

· 1 d-1 w: $ 59.0 k (Red)

· 1w-1m: $59.9k (Orange)

· 1 m-3 m: $ 63.6 k (blue)

· 3 m-6 m: $ 65.2 k (Purple)

Investor Feedback

Evaluating unrealized losses can provide a deeper understanding of the pressures faced by market investors. Then, we can supplement the analysis of realized profits and losses (locked) to better understand how these investors are dealing with this pressure.

Starting from the realized profit, we can see a significant decline after reaching a historical high of $73,000, indicating that most of the Tokens spent since then have locked in smaller and smaller profit amounts.

As the turn has resulted in losses, we have noticed an increase in loss events, and as the market downturn continues, the volume is rising to higher levels.

The loss event has not yet reached the extreme level of dumping during the mid-2021 or the bear market period in 2022. However, the trend of gradual increase does indicate that some fear is spreading into investors' behavior patterns.

From the perspective of the seller risk ratio, we can see that the total realized profits and losses are relatively small compared to the overall market size. We can explain this indicator within the following framework:

High value indicates that investors' profits or losses relative to their cost basis are larger when spending tokens. This situation indicates that the market may need to find a new balance and usually follows high volatility price movement.

Low values indicate that the majority of Tokens are spending relatively close to their breakeven cost basis, indicating a certain degree of balance has been achieved. This usually indicates that the 'profit and loss' within the current price range has been exhausted, and typically describes a low volatility environment.

The seller's risk ratio has dropped to a low level, indicating that the Token prices of most on-chain transactions are very close to their original acquisition prices. This indicates that profit and loss activities are gradually saturated within the current price range.

From a historical perspective, this implies an expectation of increased Fluctuation in the short term, similar to the situation in 2019.

Riding the Cycle

In the downtrend, patience and holding become the dominant market dynamics. A large number of long-term holder Tokens have been spent to earn profits from the March ATH, resulting in a net supply surplus.

Recently, LTH has slowed down the speed of profit-taking, and the supply accumulated during the ATH pump period is gradually maturing into long-term holders. However, historical examples of LTH supply increasing like this indicate that this usually happens during the transition to Bear Market.

Combining the above observations, we noticed that as the Token matures and transforms into a long-term holder, the wealth held by new demand investors has decreased in the recent months.

The percentage of wealth held by new investors does not reach the high limit experienced during the previous ATH distribution event. This may indicate that the peak in 2024 is more in line with the mid-term cyclical high point of 2019, rather than the macro highs of 2017 and 2021.

To summarize our analysis, we will refer to a simplified framework that uses key on-chain pricing levels to think about historical BTC market cycles:

· DepthBear Market: The price is lower than the actual price. (Red)

· Early Bull Market: Prices trade between actual price and true market average. (Blue)

· Enthusiastic Bull Market: trading between ATH and the real market average. (Orange color)

· Happy Bull Market: Prices higher than the previous ATHs. (Green)

Under this framework, PA is still within a bullish market structure, which is a constructive observation. However, if there is a temporary downturn, the price level of $51,000 remains a crucial follow area that must be maintained in order to further appreciate.

Summary

BTC has only fallen 22% from its all-time high, much less than the previous cycle's decline. Ordinary BTC investors are still making considerable profits, highlighting the stability of their holdings.

Nevertheless, the short-term holder group continues to bear relatively high unrealized losses, indicating that they are the main risk group and the expected source of selling pressure during an economic downturn.

In addition, profit and loss activities are still very few, indicating that our current range has been saturated, and key indicators such as the seller risk ratio have also been saturated, implying that volatility may intensify in the near term.

Original text link