Bitcoin speculators sit on 93% unrealized losses after $365M ‘wipeout’
2024.08.08 04:19
Bitcoin (BTC) has “purged” market speculators as liquidations reach $365 million, new research says.
In the latest edition of its weekly newsletter, “The Week Onchain,” crypto analytics firm Glassnode confirmed a “statistically significant capitulation.”
Bitcoin unrealized losses echo FTX
Bitcoin’s short-term holders (STHs) have come under intense pressure thanks to this week’s BTC price crash.
As Cointelegraph reported, at one point, these newcomer entities sold $850 million of BTC at a loss. Now, new findings from Glassnode show the extent to which overleveraged players have been removed from the market.
STH entities are those hodling a given unit of BTC for 155 days or less, while their counterparts, the long-term holders (LTHs), hodl for more than 155 days.
STHs tend to be far more sensitive to market shocks than LTHs, and this week’s trip to $49,500 was no exception.
“Short-Term Holders are currently holding the largest unrealized loss since the FTX implosion, which again highlights a point of serious investor stress imposed by current market conditions,” Glassnode summarized.
Just 7% of STH holdings currently sit in profit, a number that echoes the BTC price dip below $30,000, which began a year ago.
“This is also more than -1 standard deviation below the long-term average for this metric, and suggests a notable degree of financial stress amongst recent buyers,” the research added.
Bitcoin STH % supply in profit with standard deviation bands (screenshot). Source: Glassnode
Glassnode likewise confirmed that STHs are “dominating” onchain losses, with just 3% attributable to the LTH cohort.
Various other metrics provided similar insights into the speculator wipeout, with the research characterizing the broader market reaction to the price declines as “one of panic and fear.”
The STH spent output profit ratio (SOPR) metric, for instance, recorded lows only surpassed on 70 days in Bitcoin’s history.
“Short-Term Holder SOPR has also reached staggering depths, as new investors locked in a -10% loss on average,” “The Week Onchain” commented.
Bitcoin STH SOPR chart (screenshot). Source: Glassnode
An “exceptionally eventful month” for Bitcoin
SOPR has not gone unnoticed elsewhere. In one of its Quicktake blog posts on Aug. 7, onchain analytics platform CryptoQuant drew similar conclusions, suggesting that current prices could mark a potential buying opportunity.
Related: BTC price eyes $58K CME gap as analysis flags 2 Bitcoin death crosses
“We know that the metric last reached the 0.95 level in December 2022, which initiated a bull run,” contributing analyst XBTManager noted.
“During bull trends, the 0.95-0.90 range is usually a good buying level. Currently, the metric is at 0.90.”
Concluding, Glassnode called August an “exceptionally eventful month.”
“Bitcoin recorded its largest drawdown (-32%) from the ATH of the cycle, and precipitated a statistically significant capitulation amongst Short-Term Holders. Futures liquidations fuelled the fire, with over $365m worth of contracts forced closed, and creating a 3 standard deviation reduction in open interest,” it wrote.
“This has led to a meaningful flush out of leverage, and paves the way for on-chain and spot market data to be of key importance for analysts assessing the recovery in the weeks to come.”
Bitcoin futures liquidations (screenshot). Source: Glassnode
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
