Growing underwater Bitcoin supply may create selling pressure.
Price drops indicate the market is nearing a bottom, presenting buying opportunities.
The significant digital asset, Bitcoin, recently witnessed a 14.6% decline in its worth, falling from a previous peak of $30.9K to a present value of $26.4K. This marked downturn might provoke a measure of discomfort in specific individuals. However, it presents an ideal opportunity to delve into the complexities of the marketplace and scrutinize the broader consequences of such shifts in value.
This downward trajectory has further led 2.71 million BTC into an ‘underwater’ position, meaning these assets are now worth less than initially purchased. This figure equates to approximately 14% of the circulating supply of Bitcoin.
Consequently, this has raised the total supply of Bitcoin, currently in loss from 3.96 million to 6.67 million BTC. A sharp increase, amounting to an alarming 68.4% in the said period.
Bitcoin’s Dip Triggers Selling Frenzy: What’s Next for Investors?
Firstly, a growing supply of Bitcoin ‘in the red’ can signal increased selling pressure. As more investors discover their assets are in a loss-making position, they might mitigate further losses by selling, adding more momentum to the downward trend of the price. This phenomenon might amplify the short-term downward trend.
Nevertheless, it’s crucial to highlight that such developments don’t necessarily signal a calamity for Bitcoin. Steep declines in price, followed by a surge in the supply of Bitcoin being traded at a loss, suggest the market is approaching its lowest point. Historically, such instances have often been followed by a reversal as ‘weak hands’ get shaken out and more resilient investors buy the dip, driving the price back up.
Moreover, times of downturn frequently present chances for long-term investors to augment their holdings at reduced prices. These investors, commonly dubbed ‘HODLers’ within cryptocurrency, possess a more extended investment outlook and remain unperturbed by transient market shifts. They see these dips as opportunities to accumulate more Bitcoin at a discounted rate.