Blockchain analytics firm Glassnode is weighing in on the potential for a second Bitcoin panic sell-off following the flagship crypto asset’s 50% collapse from its all-time high of $64,802.
In their weekly letter, Glassnode says that the amount of realized losses that occurred during the recent crash eclipsed all other capitulation events in Bitcoin’s history, including March 2020, Nov 2018, and the sell-off that concluded the last bull market in January and February 2018.
The firm also takes a look at the amount of unrealized losses on the market and contemplates whether those losing positions would be sold once Bitcoin ignites a relief rally.
“A major question that remains is what is the magnitude of unrealized losses, or in other words, how many underwater coins could still panic sell out? We inspect the Relative Unrealised Losses metric which presents the ratio between total underwater value and the current market cap.”
Glassnode concludes that between 9% and 9.5% of the entire market cap of Bitcoin, currently $700 billion, are unrealized losses, equating to about $65 billion in underwater value.
The analytics firm adds that the Net Unrealized Profit/Loss (NUPL) metric, which determines whether the BTC market is in a state of profit or loss, fell below the 0.5 level, indicating that only half of Bitcoin’s market cap is in profits. While significant, the 0.5 NUPL area has acted as support in previous bull runs, with the 2017 cycle hitting this level four times before the peak. In the 2021 bull market, the latest correction marks the first time BTC has reached the 0.5 point.
Glassnode says that the ones who were hit hardest by the market crash were by far the short-term holders.
“Short-term holders currently hold an aggregate unrealised loss of -33.8% of the market cap on their coins. This compares only to the most extreme drawdowns in Bitcoin history including:
The first Bull top in 2013
Three events in the 2014-15 bear
Four events in the 2018 bear
March 2020 capitulation.”
While an additional panic sell-off for Bitcoin is in the cards, the crypto insights platform believes BTC is in a healthy spot.
“Overall, this flush of speculation and leverage is a healthy and necessary process, as it removes excessive speculation and forced sellers to allow more organic price action to return down the road.”
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