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The Bitcoin price is still recovering from a big dip to $60,000 in the first three days of October. As bulls and long term holders continue to capitalize During the dip, analysis of on-chain data has revealed that selling pressure has diminished dramatically as the majority of short-term holders have exited the market. Interestingly, these short-term holders are responsible for the drop to $60,000, as the data shows that many of them exit the market during the initial decline, further exacerbating the price decline.
Short-term holders are leaving the market
According to an analysis of cohorts of Bitcoin holders using data from the CryptoQuant platform, the supply of Bitcoin in the hands of short-term holders has decreased significantly since the beginning of the month. While this has contributed to Bitcoin’s price decline during this period, it has not necessarily bad for crypto moving forward. This notable decline is visible in the purple bars in the chat below, with each period of price decline highlighted by an increase in short-term bond sell-offs by holders.
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The Bitcoin price, which ended September around $65,000, started October with a price dip amid broader market tensions. This in turn led to a 7.5% Bitcoin price drop until it bottomed out at $60,100. Notably, the chart highlights that this most recent drop to the $60,000 level coincided with the emergence of more purple bars, showing that the sell-off by short-term holders played a major role in the price decline.
What does this mean for Bitcoin?
Going forward, the sell-off by short-term holders and the decline in prices have given rise to more accumulation by long-term holders. This in turn will lead to the creation of a price floor around $60,000 in the coming weeks and months. It also marks the shift from more bitcoins to stronger hands who would rather hold than sell.
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In particular, the exit of many short-term owners has led to better average costs for the cohort. According to on-chain statistics revealed by a verified CryptoQuant analyst, the average cost of one- to three-month holders is now approximately $61,633, and the average cost of three- to six-month holders is approximately $64,459.
At the time of writing, Bitcoin is trading at $62,130, which puts it right in the middle of these two keyholder cohorts. According to analyst Burak Kesmeci, a decisive close above the $64,500 level would significantly strengthen the bullish momentum, giving both short- and long-term holders more confidence to continue holding. On the other hand, if Bitcoin falls below $61,600, it could trigger a wave of additional selling pressure from more short-term holders, potentially leading to further price declines to get back to $60,000.
Featured image created with Dall.E, chart from Tradingview.com