Bitcoin (BTC) has significantly declined over the past few days, leading to a fall in unrealized profits, particularly among short-term holders.
According to a report from crypto exchange Bitfinex, the decline in unrealized profits could contribute to an increase in selling pressure, leading to further market correction.
Bitcoin’s Unrealized Profits Plummet
Since BTC fell and stayed below the $43,000 level, more than half of the profits accumulated by short-term holders have been wiped out, with many investors, particularly those who purchased the digital asset less than a month ago, exiting their positions at a loss.
Such a significant decrease in average profits for short-term holders, who usually react quickly to short-term market fluctuations, can precede selling pressure, exit liquidity, or even more substantial market corrections as this cohort of investors moves to liquidate their positions to minimize losses or realize remaining profits.
The current market sentiment is evident in the Spent Output Profit Ratio (SOPR). This metric compares the combined USD value of all coins spent on a given day with the combined USD value of these coins at the time of their creation to determine the network’s realized and unrealized profit and loss.
Bitcoin’s SOPR was under one at press time, indicating that sellers are offloading their coins at a loss.
“Given these dynamics, a considerable price correction even further down from current levels across the market would not be surprising…These levels are critical to watch, as they may determine BTC’s short-term price stability and market sentiment,” Bitfinex’s analysts said.
BTC Hovers Below $41K, Further Plunge Looms
Bitfinex further warned that the next BTC price levels that could provide support are estimated to be between $38,000 and $36,000, with the former sitting close to the short-term holder’s realized price of $38,307.
With BTC changing hands at $40,000 – 18% shy of its post-ETF approval high of $48,800 – at writing time, analysts have stated that a further price correction would be unsurprising as a bearish sentiment seems to be prevailing in the market.
As CryptoPotato reported last week, short-term holders’ unrealized profit margins may need to go below 0% before we can call a price bottom and start expecting a BTC rally.