From 232% to 13%: What Happened to Bitcoin’s Short-Term Gains?

Bitcoin has been trading above $118K, down just over 3% from its recently established all-time high.

Despite this, its short-term holders are now seeing just 13% in unrealized profits, according to on-chain data. This group, which is defined as wallets holding BTC between one and three months, often reflects broader sentiment among spot market participants aiming to optimize returns.

Capitulation Incoming?

In its latest analysis, CryptoQuant explained that while Bitcoin continues to trade near its record highs, these holders are far less profitable than in past cycles. At previous tops in 2012 and 2021, this cohort enjoyed average profits of 232% and 150%, respectively. On the other hand, their gains in the current cycle peaked at 69% and have since dropped sharply.

With an average realized price around $104,000, many of these traders bought in near the cycle’s top. Their limited cushion makes them sensitive to market volatility, though current conditions do not yet suggest mass selling.

However, should losses deepen, there’s a risk of capitulation from these short-term holders – an event that could pressure the market further. CryptoQuant explained that historically, such shakeouts have often hinted at local bottoms, drawing in strategic buyers looking to capitalize on temporary weakness.

Meanwhile, institutional analysts anticipate a potential pause in the crypto asset’s rally.

Tactical Pause for Bitcoin

Matrixport stated that the setup for this week suggests that momentum may stall as traders confront a wave of market-moving events – including peak US earnings season, a White House report on digital assets, and the Federal Reserve’s rate decision. While sentiment has shifted to near-universal bullishness, history urges caution.

August and September have consistently ranked among Bitcoin’s weakest-performing months. August, for one, has delivered an average return close to zero and positive returns in only three of the past ten years.

Because of these factors, some traders might start selling, which could cause Bitcoin to dip or move sideways for now. Although the broader outlook remains positive heading into year-end, this week could mark a tactical pause before Bitcoin resumes its longer-term uptrend.