What is a top-heavy market, and are we in one?

The crypto marketplace saw important turbulence past week arsenic a monolithic futures liquidation lawsuit pushed Bitcoin’s terms beneath the $25,000 mark. And portion determination has been a flimsy recovery, with BTC hovering astir $25,900 astatine the clip of writing, the marketplace remains connected bladed ice.

The superior concern? Bitcoin is operating successful a top-heavy market.

A top-heavy marketplace has a important attraction of short-term holders who person acquired their BTC astatine prices precise adjacent to oregon supra Bitcoin’s existent spot price. This tin beryllium a precarious concern for the market, arsenic ample volumes of proviso acquired supra the spot terms make the imaginable for added selling pressure, further destabilizing Bitcoin’s fragile terms point.

On Agu. 15, Bitcoin was trading astatine astir $29,400, and 73.35% of its proviso was successful profit. On Aug. 22, erstwhile Bitcoin’s terms dropped to $25,600, the percent of Bitcoin’s proviso successful nett plummeted to 59.35%. This displacement indicates that 14% of Bitcoin’s proviso fell into an unrealized loss successful conscionable a week.

Graph showing the percent of Bitcoin’s proviso successful nett from July 24 to Aug. 23, 2023 (Source: Glassnode)

This shows that 14% of the full Bitcoin proviso was acquired astatine a terms higher than $25,600. This reflection aligns with erstwhile analyses by CryptoSlate, highlighting that short-term holders had been consistently accumulating and holding Bitcoin, reinforcing the inclination we’re witnessing now.

Graph showing the realized terms for short-term holders from June 18 to Aug. 23, 2023 (Source: Glassnode)

So, what implications does a top-heavy marketplace person for Bitcoin and its investors?

Firstly, the beingness of a ample fig of short-term holders tin pb to accrued volatility. Having acquired their Bitcoin astatine higher prices, these holders mightiness beryllium much inclined to merchantability astatine the archetypal motion of betterment to minimize losses, thereby adding to the selling pressure.

Secondly, this script could deter caller investors from entering the market, fearing further terms drops and accrued volatility.

The station What is simply a top-heavy market, and are we successful one? appeared archetypal connected CryptoSlate.