The price of Bitcoin is still recovering from a big fall to $60,000 in the first three days of October. Like bulls and long-term holders continue to capitalize On the way down, analysis of on-chain data revealed that selling pressure eased greatly as most short-term holders exited the market. Interestingly, these short-term holders are responsible for the drop to $60,000, as data shows that many of them exited the market during the initial decline, further exacerbating the price drop.
Short-term holders exit the market
According to an analysis of Bitcoin holder groups using data from the CryptoQuant platform, the supply of Bitcoin held by short-term holders has decreased substantially since the beginning of the month. Although this contributed to the decline in Bitcoin’s price during this period, it is not necessarily bad for encryption moving forward. This notable decline is visible in the purple bars in the chat below, with each period of price decline highlighted by an increase in selling from short-term holders.
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The price of Bitcoin, which ended September at around $65,000, began October with a price drop amid broader market tensions. This, in turn, led to a 7.5% drop in the price of Bitcoin, until it reached $60,100. Notably, the chart highlights that this most recent drop to the $60,000 level coincided with the emergence of more purple bars, revealing that liquidation by short-term holders played a significant role in the price drop.
What does this mean for Bitcoin?
In the future, liquidation by short-term holders and falling prices gave rise to more accumulation by long-term holders. This, in turn, gives rise to the creation of a price floor of around $60,000 in the coming weeks and months. It also marks the shift of more bitcoins into stronger hands. who would rather keep than sell.
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Notably, the exit of many short-term holders gave rise to a better average cost for the group. According to on-chain metrics revealed by a verified CryptoQuant analyst, the average cost of one to three month holders is now around $61,633, and the average cost of three to six month holders is around $ $64,459.
At the time of writing, Bitcoin is trading at $62,130, which places it right in the middle of these two cohorts of key holders. According to analyst Burak Kesmeci, A decisive close above the $64,500 level would significantly strengthen the bullish momentum, giving short- and long-term holders more confidence to continue holding. On the other hand, if Bitcoin falls below $61,600, it could trigger a wave of additional selling pressure from more short-term holders, potentially leading to further price declines to revisit $60,000 again.
Featured image created with Dall.E, chart from Tradingview.com