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The approval of the first Bitcoin spot ETFs by the United States Securities and Exchange Commission (SEC) on January 10 was a significant milestone in the crypto market. However, this step led to even greater volatility in Bitcoin price and on-chain activity.
Initially, the price of Bitcoin reacted positively to the news of the ETF approval, climbing to $46,608 on January 10. On January 11, the price fell to $46,393, and a steeper decline occurred on January 12, when the price plummeted. at $42,897. This downward trend continued over the following days, peaking with a price of $41,769 on January 14.
The activities of short-term holders, particularly their transactions with exchanges, show where most of the volatility comes from. A significant increase in the volume of Bitcoin sent to exchanges was observed, particularly on January 12, when short-term holders transferred 111,476 BTC to exchanges, marking the highest level since May 19, 2021. This spike indicates a considerable sale by addresses that have held their BTC for less than 155 days.
A closer look at short-term holders' profit-and-loss positions shows the extent of profit-taking during volatility. On January 11, the volume of Bitcoin held by short-term holders as profits sent to exchanges reached its peak.
Conversely, the following day saw a spike in Bitcoin held by loss-making short-term holders being transferred to exchanges. These moves suggest a rapid change in market sentiment – from taking profits to cutting losses – as the price began to decline.
The market value to realized value ratio (MVRV) helps us understand the profitability of these securities in the short term. MVRV compares the market value (the price at which BTC last moved) with the realized value (when BTC was last purchased).
Typically, a high MVRV ratio suggests that holders are making profits and may be inclined to sell, while a lower MVRV ratio indicates minimal profit or losses. During this period, the MVRV ratio has trended downward, reflecting a decline in the profitability of short-term securities, potentially contributing to the selling pressure observed in the market.
Another essential channel metric is the spent output profit ratio (SOPR), which evaluates the spent output profit ratio. When the SOPR is greater than 1, it implies that the coins are being sold at a profit. On the other hand, an SOPR less than 1 indicates that the coins are being sold at a loss.
Notably, the SOPR of short-term holders fell below 1 on January 12-13. This is important because it signals a change in market sentiment, with holders likely selling Bitcoin at a loss in response to falling prices.
Short-term data surrounding the SEC's approval of the first spot Bitcoin ETFs reveals a Bitcoin market that is highly responsive to regulatory developments. The initial positive anticipation of approval quickly turned into panic, characterized by massive selling by short-term holders.
This behavior is reflected in the significant amount of Bitcoin transferred to exchanges, especially on January 12, and the decline in the MVRV ratio. The SOPR falling below 1 shows how quickly and aggressively short-term holders react to market volatility.
The article Short-Term Holders Determine Bitcoin's Post-ETF Volatility appeared first on CryptoSlate.
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