On Saturday, January 3, Bitcoin price’s positive start to the new year was threatened as cryptocurrency markets reacted negatively to the recent US military action in Venezuela. The flagship cryptocurrency briefly hit above $90,000 after U.S. President Donald Trump announced the arrest of Venezuelan leader Nicolas Maduro.
Although the long-term impact of the recent US airstrikes on the cryptocurrency market is not yet known, the price of Bitcoin is likely to see a short-term upward trend. Interestingly, the latest on-chain data suggests that the cryptocurrency market leader could potentially reach a correction low.
Could BTC price form a bottom?
Crypto analyst Darkfost said in a Quicktake post on the CryptoQuant platform that the most responsive group of Bitcoin investors, known as short-term holders (STHs), remain under pressure as BTC prices fluctuate between the $85,000 and $92,000 levels.
Darkfost shared that the expected cost basis for a Bitcoin short-term holder is around $103,000 after taking into account the impact of Coinbase’s recent large BTC transfer on the chain. The average unrealized loss for this group of investors is around 15%, according to data from CryptoQuant.
As Darkfost explains in his Quicktake post, this number is calculated based on the percentage deviation from a short-term cost-of-carrying baseline. “This approach allows us to identify periods of stress for the most reactive and sensitive investors in the market,” said OnChain analysts.
Source: CryptoQuant
From a historical perspective, correction lows often form next to top cryptocurrencies when short-term Bitcoin holders see a significant downside and average unrealized losses are around 15%. According to Darkfost, BTC may be looking at a similar situation here.
However, cryptocurrency analysts pointed out that this signal could be false, especially if Bitcoin price begins a long-term bear market. If the bear market is deep or prolonged, unrealized losses on STH may remain above 15% for an extended period of time or open the door to continued distributions.
Bitcoin price at a glance
As of this writing, the BTC price is around $91,160, up more than 1% in the last 24 hours. The flagship cryptocurrency is up nearly 4% over the past seven days, according to data from CoinGecko.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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