In week 34 of 2024, the cryptocurrency market continued to experience strong volatility, with Bitcoin emerging as a stronghold in the storm. Glassnode’s “New Investor Pain Cycle” report delves into capital flows and investor sentiment, revealing a clear picture of the behavioral divide between long-term holders and new entrants to the market.

The Rise of Bitcoin

Since bottoming out in November 2022, Bitcoin has asserted its dominance as its share of the total cryptocurrency market capitalization has skyrocketed from 38.7% to 56.2% in August 2024. This not only demonstrates investor confidence in the digital asset, but also reflects the trend of capital flows shifting away from riskier assets amid market uncertainty.

Meanwhile, Ethereum, the second largest asset in the ecosystem, saw its market capitalization decline slightly from 16.8% to 15.2%. At the same time, the market capitalization of stablecoins dropped sharply from 17.3% to 7.4%, and altcoins were not immune to the decline, from 27.2% to 21.3%. These figures show a clear shift of capital towards Bitcoin, which is considered a safer asset during volatile times.

The Enduring Power of Long-Term Investors

Despite the continued volatility of the market, Long-Term Holders (LTHs) have shown remarkable resilience. They have not only kept their faith but have continued to accumulate Bitcoin despite the sharp price swings. Data shows that LTHs are locking in profits of an average of $138 million per day, reflecting a level of demand that has been strong enough to sustain Bitcoin’s price stability in recent months.

The Realized Profit/Loss Ratio of LTHs, despite a decline from its peak in March 2024, remains high. This suggests that long-term investors continue to take profits, but at a slower pace, similar to previous market cycles, such as the peaks in 2013 and 2021.

This stability is further reinforced by the fact that the supply held by LTHs is increasing sharply, especially for Bitcoins purchased during the peak in March 2024, suggesting that “HODL” behavior is outpacing selling behavior.

Difficulties Accumulate for Short-Term Investors

In contrast to the persistence of long-term investors, short-term investors (STHs) are facing major challenges. The STH-MVRV Ratio, a key measure of unrealized gains and losses of short-term investors, has dropped below 1.0, indicating that the majority of new investors are incurring losses. In fact, this ratio suggests that recent Bitcoin buyers are holding unrealized loss positions, which can cause panic and sell-offs, especially during periods of market weakness.

The STH-SOPR, another measure of short-term investors’ realized gains/losses, has also fallen below 1.0, indicating that new investors are not only holding unrealized losses but are also starting to realize them. This is a clear signal of growing financial stress among this group of investors, and that the market is at a critical juncture.

Market Psychology: Between Panic and Steadfastness

The report also points out that short-term investor reactions may be overstated. The gap between the cost of capital spent and the cost of capital held suggests a degree of overreaction, which often leads to the formation of local tops or bottoms in the market.

However, when compared to historical events, the current level of losses (both realized and unrealized) is not large enough to cause a serious psychological shock like previous price declines. A comparison with the 2016-2017 cycle suggests that the current level of losses for investors may not be as severe as it appears.

Conclusion: Lessons From the Market

The analysis shows that despite the volatility and uncertainty facing the market, capital continues to flow into safer assets like Bitcoin. This has led to a significant expansion of Bitcoin’s dominance, with the asset now accounting for more than half of the total global market capitalization. While long-term investors remain steadfast in their HODL strategy, short-term investors are suffering significant losses, partly due to overreaction to recent market volatility.

While the data shows a clear divide between investor groups, one thing is clear: persistence and a long-term investment strategy remain key to weathering market turmoil. Lessons from both the past and present underscore the importance of keeping emotions at bay, especially during critical market moments. The cryptocurrency market, with its complexity and volatility, requires investors to have a cool head and a sustainable strategy to achieve long-term success.



https://tapchibitcoin.io/chien-luoc-dai-han-gianh-chien-thang-trong-thi-truong-bien-dong.html