By Yasin Ebrahim
Investing.com -- The long-term bitcoin holders have often served as the last line of defence ready to buy the dips. But this latest rout in bitcoin has left even the strongest hands jumping ship, pointing to a deeper bear market that could last for weeks or even months.
BTC/USD fell 17% to $23,196.
Unlike their short-term peers, long-term holders, or LTHs, are seen as savvy BTC accumulators having amassed their coins early in bull trends at cheaper prices, or at a lower cost basis.
When selling, or spending their bitcoin, the ‘hodlers’ are typically able to sell BTC at a lower average cost basis than their short-term peers. But this latest rout has flipped the script.
Long-term holders, are currently spending coins with a “higher cost basis than STHs,” and that’s a bad omen for hopes of a quick rebound in the popular cryptocurrency, according to cryptocurrency research firm Glassnode.
This phenomenon historically coincides “with deep bear market finales, lasting between 52-days (2020) and 514-days (2014-15) and accompanied by additional drawdowns in the price of -40% to -65%,” Glassnode added.
As long-term holders are now realizing “significant losses,” their conviction, which many believed is insensitive to price, to buy the dips has been rattled.
About 15,000 to 20,000 BTC per month are transitioning into the hands of Bitcoin HODLers, according to Glassnode, a decline by around 64% since early May, suggesting a “weakening accumulation response.”
“The current bear market is now entering a phase aligned with the deepest and darkest phases of previous bears,” Glassnode said.
Monday’s plunge in bitcoin was exacerbated by reports that crypto lending exchanges Celsius and Binance had paused withdrawals for their customers. The move lower pushed BTC's price below its realized price of $23,430, or the average price of every coin in supply, valued at the time it was last spent on-chain, according to Glassnode.
The bulk of recent selling, however, has been driven by the dip in investor sentiment on risk assets including crypto and stocks amid fears the Federal Reserve will pivot to a more hawkish stance on rate hikes to combat inflation.
The Fed’s two-day meeting is set to kick off on Tuesday, and culminate in a 50 basis point rate hike, though some are calling for a hawkish surprise. JPMorgan economists said they expect the Fed to hike interest rates by 75 basis points at their meeting on Wednesday.