Bitcoin long term profitability has shocking statistics for BTC maxis

Desire for Bitcoin [BTC] Traders may have noticed that BTC volatility was down by a significant level. Not too long ago, BTC would make big moves where prices would rise by huge margins, making it quite profitable for long-term owners. Fast forward to the present: Being a long-term BTC holder is not as profitable.

A recent Glassnode analysis summarized BTC’s declining long-term profitability. According to the analysis, long-term owner profitability was down to levels previously seen in December 2018.

This was around the same time the market bottomed during the previous bearish cycle. The report also claimed that long-term holders sold at an average loss of 42% according to the long-term holder SOPR value.

#Bitcoin Profitability for long-term owners has fallen to levels last seen at the depth of the December 2018 bear market.

Long term owners are selling $BTC with an average loss of 42%, indicating that LTH used coins have a cost basis around $32k.

Live Chart: pic.twitter.com/wEnfVzEs9I

— glassnode (@glassnode) 29 September 2022

The rating coincided with BTC’s performance, particularly over the past three months. The cryptocurrency has struggled to recover from the lower range, and price levels above $25,000 have now become a thing of the past. BTC’s recent performance also indicated more affinity for price levels below $20,000.

Furthermore, BTC’s current range may explain why long-term owners choose to shift from a long-term strategy. The cryptocurrency has so far maintained a healthy level of volatility in the current range.

Long-term investors have therefore opted out of their positions to avoid missing out on short-term gains.

BTC miners are among those affected by the shift from long-term to short-term profits. They have traditionally waited for prices to go high so they can take a bigger profit, but that is no longer the case. Mining reserves were caught up in a loop of short-term selling, especially in recent weeks.

Source: CryptoQuant

The pressure on miner reserves resulted in an overall drop, especially in the last 10 days. An interesting dynamic between mining reserves and foreign exchange reserves was also observed.

Foreign exchange reserves have increased on several occasions when mining reserves have fallen, thus creating an inverse relationship. This is because the market has treated Miner Reserve outflows as a signal to sell.

The bigger picture

Lately, mining reserves have also been heavily influenced by the need for miners to cover the costs of mining. They are therefore forced to sell at times regardless of BTC’s rise or fall. Macro factors also come into play when it comes to BTC’s price action.

Economic factors such as inflation also have a massive impact on investment decisions. For example, the market conditions that prevailed in recent months resulted in a shift from risk-on to risk-off assets.

The effects of inflation have forced many traders to get out of BTC and other risky assets, and many have held the dollar instead. This further explains why the dollar has grown stronger.

It could take months to get inflation under control and this could affect BTC’s ability to recover to previous highs. The upside to this situation is that the drop in long-term investor profitability to 2018 levels could mean the market is near the bottom of the current bearish cycle.