The volatility of Bitcoin (BTC) has likely decreased significantly, as many may have noticed. BTC used to show large price fluctuations where the prices would rise by huge margins, making it highly beneficial for long-term holders. Now, it is not as profitable to hold BTC for the long term.
In a recent Glassnode report, the deteriorating long-term holder profitability of BTC was summed up. The findings say that long-term holder profitability had fallen to levels last seen in December 2018.
During the last bear cycle, the market bottomed out around here. According to the long-term holder SOPR metric, long-term holders were selling at a 42% average loss.
The analysis matched BTC’s performance, particularly over the last three months. BTC has had difficulty rising above the lower range, and price peaks above £22,400 are already a thing of the past. The most recent performance of BTC also demonstrated a stronger preference for under £17,900 price levels.
The current range may shed light on why long-term investors are choosing to abandon their long-term approach. BTC has so far kept a decent amount of volatility within its current range.
In order to prevent losing out on potential short-term gains, long-term investors have been choosing to give up their positions.
One group impacted by the switch from long-term to short-term profits is BTC miners. In the past, they have waited for prices to rise in order to make higher profits, but this is no longer happening. Over the past two weeks, the short-term selloffs have trapped the reserves of the mining industry.
There was a general decline as a result of pressure on miner reserves, especially over the past 10 days. The relationship between miner reserves and exchange reserves also showed an intriguing dynamic.
There is an inverse link between exchange reserves and miner reserves since exchange reserves have often climbed when miner reserves fell. This is due to the market’s tendency to interpret withdrawals from miner reserves as a sell signal.
As mining expenses have increased recently, this has had a significant impact on miner reserves as well. As a result, they occasionally have no choice but to sell anyway. Macro variables also have an influence on BTC’s price movement.
A significant effect on investment decisions is also exerted by economic indicators like inflation. For instance, the market conditions over the past few months caused a switch from risky to safe assets.
Many traders have been hoarding dollars rather than Bitcoin and other risky assets due to inflation. Hence, the dollar has been getting increasingly stronger.
Inflation surge could take several months to ease, keeping BTC from returning to its former highs. The good news is that this may be indicative of the market nearing the bottom of its current bear cycle since long-term investor profitability has fallen to 2018 levels.