Bitcoin Traders In Profit Drop By 25%, BTC Liquidity Also “Very Low”

Bitcoin is in red, struggling against the deluge of selling pressure. Even though there was hope on August 23, and the coin started the month on a firmer footing, sellers have been unyielding.

From the daily chart, not only is the uptrend momentum fizzling out, but price action is also domiciled at the lower range of the consolidation. The immediate support zone is between $56,500, marking July lows, and around the $58,000 mark, around the August 27 lows.

Fewer BTC Holders Are Making Money: Who Are Dominant?

As the coin continues edging lower, fewer investors are making profits at spot rates. According to one on-chain analyst, there has been a 25% reduction in BTC at a profit when writing. To put in the number, this equates to nearly 5 million BTC at a loss held by different entities spread across the globe.

That nearly 5 million BTC, or 5X the amount of coins Satoshi Nakamoto holds, is in red, making price action more fragile. Though the analyst didn’t clarify the majority holders, if it turns out that most are controlled by short-term holders (STHs), then there is a higher likelihood of prices slumping.

STHs are entities that bought BTC within the last 155 days and can mainly include speculators. These addresses tend to offload BTC whenever prices tank, fueling the sell-off.

On the other hand, if the majority are long-term holders (LTHs), or those who bought over six months ago, then it will be a relief for holders. If anything, their holding may anchor the leg up toward $66,000 or higher. Most LTHs comprise institutions and HODLers, unfazed by short-term price movements.

Bitcoin Liquidity And Active Address Count Falling

While more BTC holders are in the red, it is also emerging that the Exchange Liquidity Ratio is “very low.” Taking to X, the analyst said that at spot rates, the ratio, which measures the general level of liquidity across the BTC market, is below the 365-day moving average. This means that most traders are apprehensive and stay on the sidelines.

Liquidity, which tends to rise in an uptrending market, will remain low until there is a rapid shift in trend. However, if prices slump further, volatility will spike. Even so, the short- to medium-term effect will be low liquidity as traders stay off and wait for the trend definition.

Related Reading: Crypto Market Sees $3.65 Billion Liquidity Injection, But Where’s the Buying Pressure?

Accompanying falling liquidity is also a worrying trend. One analyst on X notes that the number of active addresses on the Bitcoin mainnet is at 2024 lows. Falling address activity indicates a general decline in investor interest, translating to low engagement.

Feature image from Canva, chart from TradingView