A metric showing that short-term Bitcoin investors are transferring coins to exchanges at a loss has turned negative for the first time in 72 days, reviving a pattern previously seen before sharp declines.
In an October 30 analysis, CryptoQuant reported that the seven-day average of an indicator tracking the net profit and loss on coins short-term Bitcoin holders send to exchanges stood at -3.022. The measure fell from +21.182 on October 24, turning negative for the first time since August 18.
This shift shows that coins recently acquired by investors and moved to exchanges have gone from being in profit to being at a loss. During the nine-day period covered by the analysis, Bitcoin’s price also fell from $83,600 to $77,800. As a result, pressure from selling at a loss came to the fore for new buyers after a period of profit-taking.
In the previous two cases, the decline did not end there
The same indicator turned negative in January, when Bitcoin was at $89,000, and in May, when it was around $76,900, after remaining positive for an extended period. During those periods, the indicator fell as low as -60.768 and -41.364, respectively.
The price movements were also notable: Before a bottom formed, Bitcoin lost 28.5 percent after the January reversal and 23.2 percent after the May reversal. The risk highlighted by the analysis is that the start of selling at a loss does not, on its own, indicate that the decline has ended.
What could happen if selling at a loss continues?
CryptoQuant says a similar process could repeat if recent buyers continue selling at a loss. For this reason, the analysis identifies the duration of selling pressure after the indicator turns negative as the key factor.
As we previously reported, the Glassnode analysis noted that extended runs of realized losses have historically coincided with local bottoms. CryptoQuant’s measure, which focuses on short-term holders’ transfers to exchanges, adds a different risk to this picture: In the previous two cases, selling continued even before the price reached its bottom.
Not investment advice.