Bitcoin’s steep decline fueled by short-term holders
Bitcoin’s price dropped to $86,000 on Feb. 27 after struggling to maintain support at $88,000 for the past two days. The sudden price drop caused a swift and aggressive reaction across the market, with everyone from institutions to derivatives traders suffering losses.
Despite the significantly larger size of the derivatives market, the spot market seems to have been the initial spark that ignited the sell-off. To find out who has been offloading their holdings, we must look to spent output age bands. Spent output age bands track the USD value of spent Bitcoin, categorized by the duration coins were held, ranging from less than one day to over ten years.
On Feb. 26, Bitcoin closed at $84,365.97, with an intraday low of $82,141.65, a significant retreat from its recent peak of $98,340.89 on Feb. 20. Tracking the price variety throughout the trading day is important for analyzing market behavior, as it shows how price volatility affects selling activity and liquidity.
The price decline began after Bitcoin reached $98,340.89 on Feb. 20, marking the high point of a rapid ascent from $95,605.47 on Feb.18. By Feb. 24, the closing price had fallen to $91,642.40, reflecting an initial softening of the upward momentum.
This downward trend accelerated over the subsequent days, with the price closing at $88,598.30 on Feb. 25 and dropping further to $84,365.97 on Feb.26. The intraday low on Feb. 26, dipping below $86,000 represented a decline of approximately 13% from the Feb. 20 high in less than a week.
Spent output age bands serve as a vital tool for analyzing selling pressure, as they indicate which groups — from short-term traders to long-term investors — are transferring their coins and in what volumes.
The total USD value of spent outputs surged from $797,014 on Feb. 24 to $1,331,915 on Feb. 25 before slightly decreasing to $1,304,069 on Feb. 26. This increase in spent output aligns with the price decline, suggesting that heightened selling activity contributed to the downward pressure coming from ETFs and derivatives.
Among the various holder groups, short-term holders — particularly those in the “0d ~ 1d” cohort, representing coins held for less than one day — emerged as the dominant force in the selling activity. On Feb. 24, this cohort accounted for 87.4% of the total spent output. This figure climbed sharply to $1,167,269.01 on Feb. 25, maintaining a share of 87.6%, and remained elevated at $1,140,644.94 on Feb. 26, equating to 87.5% of the total.
The consistency of this cohort’s contribution, hovering around 87-88%, shows the outsized role very short-term holders have in influencing price movements. Aside from day traders, this cohort also includes market makers and high-frequency trading algorithms, both of which handle large trading volumes, especially during price volatility.
The “1d ~ 1w” cohort, holders of one day to one week, was the second most active group but much smaller than the “0d ~ 1d” cohort. Its spent output rose 93.3% from $48,431.23 (6.1%) on Feb. 24 to $93,625.44 (7.0%) on Feb. 25, then fell to $58,956.55 (4.5%) on Feb. 26.
Peaking on Feb. 25 with a $3,044 price drop, it trailed short-term holders. The “1w ~ 1m” cohort, holders of one week to one month, increased 122% from $15,110.73 (1.9%) on Feb. 24 to $33,548.68 (2.5%) on Feb. 25 and further to $53,873.42 (4.1%) on Feb. 26, suggesting growing selling from longer-horizon holders as prices declined.
The “3y ~ 5y” cohort, typically long-term holders, jumped 1,187% (from $777.16 to $10,004.52), a small but notable shift indicating some long-term selling.
From Feb. 25 to Feb. 26, as the price fell to $84,365.97, the “1w ~ 1m” cohort increased by 60.6%, and the “1m ~ 3m” cohort by 132.4% (from $10,104.60 to $23,483.75). The “0d 1d” cohort dipped-2.3%, and the “1d 1w” cohort fell 37%. This shows that short-term selling eased while medium-term holders (one week to three months) ramped up, possibly due to unease with the ongoing price drop.
The uptick in selling from medium-term holders on Feb. 26, as the price fell below $86,000, signals a potential erosion of confidence among those who had held for weeks or months. This shift is notable because it suggests that the sustained nature of the decline — extending beyond an initial correction — may have prompted these holders to reassess their positions, opting to secure profits or limit further losses.
The inactivity of long-term holders offers a stabilizing counterpoint to the selling pressure from shorter-term cohorts. Their negligible spent output indicates that these investors, many of whom have endured previous market cycles, remain unperturbed by the current downturn.
This resilience among long-term holders can be viewed as a foundational strength for Bitcoin’s market, as it implies that a significant portion of the supply is effectively locked away, reducing the potential for cascading sell-offs.
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