The average new bitcoin investor is holding unrealized losses. This could lead to substantial sell-side pressure in the event of a further market correction, according to a report from Glassnode. Why are new investors a risk factor for BTC?
1. New investors often enter the market at higher prices. This means they incur large unrealized losses when the price declines.
2. These losses put new investors under considerable emotional stress. When their nerves start to fray, it makes panic selling more likely.
3. If the price continues to decline, many new investors may start to close their positions en masse to cut their losses. This creates additional pressure on the market, potentially exacerbating the downtrend.
4. New investors are often less experienced in risk management and may make impulsive decisions under the influence of emotion, thus heightening volatility.
5. Unlike experienced long-term investors who can calmly wait out a correction, newcomers are more prone to panic and sell in a mad rush.
Thus, many new investors who are in the red create a potential source of instability for the bitcoin market, especially if the price declines further.