Bitcoin News – Speculators Exit as Bitcoin Records Largest Drawdown Since ATH
Bitcoin News – Bitcoin (BTC) has recently experienced a significant market purge, with liquidations reaching a staggering $365 million, according to new research. In its latest weekly newsletter, “The Week Onchain,” crypto analytics firm Glassnode confirmed that a “statistically significant capitulation” has occurred, further highlighting the volatile state of the market.
Bitcoin’s Unrealized Losses Mirror FTX Collapse
The recent BTC price crash has put immense pressure on Bitcoin’s short-term holders (STHs), those who have held their Bitcoin for 155 days or less. This group has been particularly sensitive to market fluctuations, and this week’s drop to $49,500 was no exception. As reported by Cointelegraph, at one point, these STHs offloaded $850 million worth of BTC at a loss.
Glassnode’s findings underscore the extent to which overleveraged players have been pushed out of the market. The analytics firm highlighted that STHs are currently holding the largest unrealized losses since the infamous FTX implosion, indicating severe stress among these investors due to current market conditions.
Remarkably, only 7% of STH holdings are currently in profit, a figure reminiscent of the BTC price dip below $30,000 that began last year. Glassnode noted, “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 firm also confirmed that STHs are responsible for the majority of onchain losses, with just 3% of losses attributable to long-term holders (LTHs).
Market Panic and Fear Dominate Investor Sentiment
Various metrics provide further insights into the ongoing speculator wipeout. Glassnode characterized the broader market reaction to the recent price declines as “one of panic and fear.” The STH Spent Output Profit Ratio (SOPR) metric, which measures the profitability of coins moved onchain, recorded lows that have only been surpassed on 70 days in Bitcoin’s history.
“The Week Onchain” reported that STH SOPR has “reached staggering depths, as new investors locked in a -10% loss on average.” This indicates that many new investors are exiting the market at a significant loss, further fueling the overall panic.
Potential Buying Opportunity Amidst Market Turbulence
Despite the prevailing fear, some analysts believe that current prices may present a potential buying opportunity. In a Quicktake blog post on August 7, onchain analytics platform CryptoQuant drew attention to the SOPR metric, which has reached levels that previously initiated bull runs. XBTManager, a contributing analyst at CryptoQuant, noted, “We know that the metric last reached the 0.95 level in December 2022, which initiated a bull run.”
During bullish trends, the 0.95-0.90 SOPR range is typically considered a good buying level, and with the metric currently at 0.90, there could be a similar opportunity on the horizon.
August: An Exceptionally Eventful Month for Bitcoin
Glassnode concluded its analysis by calling August an “exceptionally eventful month” for Bitcoin. The cryptocurrency recorded its largest drawdown of -32% from the all-time high (ATH) of the current cycle, leading to a significant capitulation among STHs. Futures liquidations, amounting to over $365 million, exacerbated the situation, creating a three standard deviation reduction in open interest.
This series of events has resulted in a meaningful reduction in market leverage, potentially paving the way for on-chain and spot market data to play a crucial role in assessing Bitcoin’s recovery in the weeks to come.
As Bitcoin navigates these turbulent waters, the focus will likely shift to how quickly the market can stabilize and whether this purge of speculators will ultimately benefit the long-term health of the cryptocurrency market.
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