Bitcoin prices’ strong start to the new year was threatened on Saturday, January 3, as the crypto market reacted negatively to recent US military actions in Venezuela. The leading cryptocurrency briefly dropped above $90,000 after US President Donald Trump announced the detention of Venezuelan leader Nicolas Maduro.
While the long-term impact of the recent US military attacks on the cryptocurrency market is still unclear, Bitcoin prices appear to be gearing up for a short-term rally. Interestingly, the latest on-chain data suggests that the crypto market leader may reach a corrective low.
Is it possible that a bottom is forming in BTC price?
Cryptocurrency analyst Dirkforst revealed in a Quicktake post on the CryptoQuant platform that the most reactive group of Bitcoin investors, known as short-term holders (STHs), remain under pressure as BTC prices fluctuate between the $85,000 and $92,000 levels.
Dirkforst shared that the estimated cost base for short-term Bitcoin holders is approximately $103,000 after accounting for the on-chain impact from Coinbase’s recent large-scale BTC transfers. Based on CryptoQuant data, the average unrealized loss for this investor cohort is approximately 15%.
As Darkfost explained in its Quicktake post, this number was derived based on the percentage deviation from the cost basis for short-term holders. “Using this approach, it becomes possible to identify when the most reactive and sensitive investors in the market are under stress,” said the on-chain analyst.
Source: CryptoQuant
From a historical perspective, correction lows are often formed next to the premier cryptocurrency when short-term Bitcoin holders witness significant drawdowns, with average unrealized losses reaching around 15%. According to Dirkforst, BTC may be facing a similar situation.
However, cryptocurrency analysts pointed out that this signal could be false, especially if Bitcoin price is at the beginning of a prolonged bear market. A severe or prolonged bear market could lead to an extended period of unrealized losses in STH exceeding 15% or open the door to sustained distributions.
Bitcoin price overview
As of this writing, the price of BTC is around $91,160, reflecting an increase of over 1% in the past 24 hours. The leading cryptocurrency has gained nearly 4% over the past seven days, according to data from CoinGecko.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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