A recent analysis report by Glassnode has revealed that more than 97.5% of new Bitcoin investors are currently at a loss. This is the highest level of holders with losses since FTX collapsed. 

Bitcoin investors short-term holder supply shift

Image source: Glassnode

While this statistic is far from appealing, there is a silver lining. During bear markets, whenever a substantial percentage of the short-term holders are at a loss, the chance of seller exhaustion increases rapidly. This means the current conditions do not incentivize holders to exit the market.

Bitcoin investors confidence unfavorable

However, the sell-bias exhaustion does not guarantee a price trend reversal. It only assures that the asset will be able to cover its losses. For the uptrend to start, the accumulation trend has to get stronger, and investor sentiment must be favorable for that to transpire. 

At this stage, the BTC market is characterized by panic. The negative sentiment has taken hold in the near term. The confidence ratio has been hovering in negative territory, i.e., around -0.075. 

Only when the trend starts rising back towards the transitional and subsequently to the positive territory [> -0.05] will the capital possibly start to flow back into the market. In retrospect, it will signify that holders are back in a more favorable position.

New Bitcoin investors confidence in trend

Image source: Glassnode

Bitcoin price analysis

On the daily timeframe, Bitcoin has broken below its ascending channel and has been consolidating in the $26,000–$27,000 bracket over the last few days. If the asset loses its support around $26,600, it could drop to $24,800 over the short term. 

In the weekly timeframe, Bitcoin has created a bearish fractal, similar to what was registered in 2021–2022. At that time, BTC created three local tops [the second being the highest and the third being the lowest] and then significantly shed value. 

In 2023, Bitcoin has followed a similar trend and created highs at $31,000, $31,804, and $27,483.5. If history were to repeat itself, BTC’s downtrend would likely commence over the next few days. The mid-term target would be around $20,000, coinciding with an unfilled CME gap.

BTCUSD Chart

Image source: Tradingview BTCUSD

Bitcoin investors losing money

The recent analysis by Glassnode is one of many to suggest that Bitcoin investors are losing money. A Bank for International Settlements (BIS) study found that around three-quarters of users have lost money on their Bitcoin investments. The study assumes that each new user bought $100 of Bitcoin in the month of the first app download, and in each subsequent month, 81 percent of users would have lost money. 

The median investor would have lost $431, corresponding to 48 percent of their total $900 in funds invested. Another study found that 38% of Americans who’ve held a form of currency say they’ve sold it for less than when they bought it.

The risks associated with investing in Bitcoin are not limited to market volatility. A recent CNBC report highlighted the story of a 22-year-old who lost $80,000 investing in crypto. The young investor had invested on margin, which means borrowing money to invest in an asset. This is a risky strategy as it amplifies both gains and losses.

The cryptocurrency market, especially Bitcoin, is in a precarious position. While a significant portion of short-term holders are currently at a loss, the potential for seller exhaustion might offer some respite. However, a shift in investor sentiment is paramount for a genuine recovery. 

Source: CoinMarketCap