Bitcoin’s recent price fluctuations have posed challenges for investors who entered the market at the March highs. Currently priced at $58,083, Bitcoin is presenting a tough environment for these “new investors,” reminiscent of the conditions leading up to its all-time high in 2020.
In a recent analysis posted on September 2 by the on-chain analytics platform CryptoQuant, the behavior of short-term holders has been compared to trends observed in mid-2019.
Struggles of Recent Buyers
Investors who purchased Bitcoin in the last six months are facing a difficult decision: either hold onto their investments or sell at a loss, as the cryptocurrency has experienced months of stagnant price movement.
According to CryptoQuant contributor Avocado_onchain, the rise in unspent transaction outputs (UTXOs) that are six months old or younger indicates a surge of new investors who likely entered the market when Bitcoin peaked at $73,800 in March.
“The decline in the proportion of these UTXOs suggests that many of these investors have either left the market due to losses from Bitcoin’s lack of movement or have held onto their assets long enough to transition into the six-month-plus category,” the analysis states.
A chart accompanying the post reveals that the current levels of new investor UTXOs are strikingly similar to those seen in 2019, when Bitcoin reached a local high before taking nearly 500 days to surpass the then all-time high of $20,000 from December 2017.
Historical Context and Future Outlook
The analysis notes that a comparable trend occurred around the halving event in 2019, which ultimately took about 490 days for Bitcoin to achieve a new all-time high, influenced in part by the COVID-19 pandemic.
The report emphasizes the importance of new investors for Bitcoin’s price appreciation. Unlike the traditional definition of “short-term holders,” who typically retain their Bitcoin for up to 155 days, the new investor group is crucial for driving price increases during bull markets. Currently, these short-term holders are facing unrealized losses as their average cost basis exceeds the current market price.
“Bitcoin has been trading within a broad range for over six months, with no clear catalyst for a breakout,” Avocado_onchain concluded. “While I remain optimistic about the long-term upward trajectory, it’s prudent to manage expectations in the short term and keep a close watch on market developments. Historically, an influx of capital from new investors has been essential for driving Bitcoin’s price higher.”
Additionally, other on-chain metrics suggest that the current landscape is reminiscent of four years ago, with Bitcoin’s hash price nearing levels that could establish a long-term price floor.
