According to Bitfinex, new bitcoin investors are under severe stress.

The current market situation has put many new Bitcoin investors in financial stress. This is evident in many metrics that indicate a bearish environment and highlight conditions that could intensify market volatility, increase selling pressure and trigger further price declines.

According to a Bitfinex Alpha report, metrics such as short-term holder MVRV (market value to true value) and short-term holder value-basis standard deviation (SD) show that new market participants are seeing significant losses in bitcoin. (BTC) investments.

BTC investors in tension

The MVRV ratio for short-term holders compares the fair market value of BTC to its perceived value, focusing on the new set of investors. A ratio below one indicates that short-term holders and new investors are experiencing unrealized losses. This means that the current market value of BTC is less than what they paid for their purchases, and they sell at a loss.

At the time of publication, the short-holder MVRV ratio shows that in 2022 the bear market is low, so new investors are sitting on the biggest unanticipated losses. The metric of Bitfinex analysts focuses on the depth of the market collapse and the level of financial stress. This is what a bunch of investors are facing.

“Such conditions could exacerbate market volatility as these investors would be more prone to panic selling in the event of further price cuts, which could lead to a slowdown in bitcoin prices,” the analysts said.

How severe is Bitcoin's recent correction?

A move of -1SD below the short-term owner's cost basis indicates significant negative sentiment and tension among new market participants. In addition, the SD band detects how often the price of Bitcoin falls below the average purchase price of recent investors, indicating the level of losses in this band.

Bitcoin's recent decline below $50,000 indicates a significant market decline as the asset's spot price nears the -1SD band. This event is so rare that it was recorded only in 364 out of 5139 BTC trading days.

“This situation not only reflects the speed of the decline, but also serves as an important signal to investors regarding the negative sentiment among the new market participants and the potential pressure. Such insights are useful in assessing market conditions and recovery conditions,” the analysts added.