Bitcoin is currently trading below the average price paid by short-term holders, which could potentially lead to panic among investors who are facing unrealized losses, according to an on-chain analyst. In a report released on May 1, analyst James Check, also known as “Checkmatey,” stated that these recent buyers are statistically more likely to panic in such situations. The drop in Bitcoin’s price on May 1, where it briefly plummeted 8% below a key support level to $56,814, has caused concerns. This is the lowest level Bitcoin has reached since February, which is significant for short-term holders who purchased Bitcoin at an average price of $59,600. Despite a slight recovery to $57,631 at the time of publication, short-term holders still face an average unrealized loss of 3%. The recent decline in Bitcoin’s price has resulted in the liquidation of $100.27 million in long positions. The sell-off was driven by market participants awaiting the United States Federal Reserve’s interest rate decision. Check emphasized that while holding an unrealized loss is not ideal, short-term Bitcoin holders have experienced similar situations in the past. He noted that breaking the short-term holder cost basis is not the end of the world or the bull market, as it is recoverable. The short-term holder cost basis typically acts as support during bull periods and resistance during bear periods, according to On-Chain College. However, they also pointed out that certain events would not indicate the end of the bull market. For example, a quick move to $59,600, slightly above Bitcoin’s current price, would be considered bullish. On-Chain College cited a similar pattern in June 2023, where the price dropped below the cost basis but quickly rebounded before a significant upswing. They also mentioned that a sustained period below the cost basis could also indicate a bullish trend, referencing Bitcoin’s price behavior in August 2023. It’s important to note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any decisions.
Bitcoin's price drop of 4% below the average cost may cause concern among short-term holders.