Bitcoin Market Update

Bitcoin has fallen below the cost basis for short-term holders (under 155 days).
Heavy outflows from ETFs have contributed to the recent fall, and the downtrend could continue.

The Bitcoin [BTC] Fear and Greed Index showed a reading of 26, still indicating fear, although it improved from the previous day’s reading of 20, which represented extreme fear.

This sentiment is a result of BTC’s 13.8% drop in the past nine days.

In a post on CryptoQuant, analyst Axel Adler pointed out that short-term holders (STHs) have seen modest losses due to the recent price drop. On average, they are about 6.4% below their cost basis, which is approximately $90.5k according to CQ data.

Where is Bitcoin headed next?

Adler noted that STHs experiencing modest losses could lead to a market period of consolidation and accumulation. However, this would require steady demand and a shift in macroeconomic sentiment, which currently remains fearful and uncertain.

US spot ETF flows showed heavy outflows over the past ten days, which is one of the main reasons for Bitcoin’s recent losses. Data revealed inflows of $94.3 million on February 28 were dwarfed by the $1.14 billion outflow on February 25.

Sentiment is still bearish, and it may take time for bulls to gain control of the market. Meanwhile, further losses are possible, and traders and investors need to be prepared.

By definition, the MVRV ratio is the market value divided by the realized value, focusing on holders who have held BTC for fewer than 155 days. A drop below 1 MVRV means that holders are at a loss, as previously highlighted.

In the previous cycle, after the BTC halving, prices did not drop below the STH cost basis until mid-May 2021. BTC went below 1 standard deviation from the MVRV ratio and stayed there until July before recovering in August.

A similar scenario may occur again, where Bitcoin could see more losses and trend downward in the coming weeks, potentially consolidating in the $65k-$70k range for a couple of months before recovery.