In the latest weekly report from the analytical firm Glassnode, the actual losses for the week of May 17-23 are characterized as “a capitulation to the history books.” The report states that among BTC sales that reflected losses in that period, a record high of $ 4.53 billion was recorded on May 19. On the other hand, the total losses were USD 14.2 billion, says the report.
«The magnitude of the actual losses on chain this week overshadowed all previous capitulation events, including March 2020, November 2018, and the sell-off that ended the last bull market in January-February 2018, ”says Glassnode.
In the The following graph shows the daily loss peaks since January 2017. The historical maximum of losses registered last Wednesday, May 19, of USD 4,530 million stands out.
Even taking into account the BTC exchanged with ga nancias, this capitulation event represents the largest net loss, with a significant margin , says the report. «More than USD 2,560 million in net losses on chain were taken were recorded on May 19, a sum that is 185% greater than the liquidation due to COVID-19 , in March 2020 », the authors affirm.
The following graph shows that This capitulation follows a strong period of net profit taking (green peaks), according to Glassnode. This could be considered an opposite reaction to the downside. “What this indicates is that this event took a large part of the market by surprise,” the document states.
These net losses in the chain have resulted in a decrease in the effective capitalization of bitcoin , the report says. “Coins bought at higher prices have lower prices. Effective capitalization decreased by $ 7 billion (-1.8%) this week from its all-time high of $ 377 billion, ”says Glassnode.
Three-quarters of bitcoin addresses in profit
Glassnode highlights the «wave of FUD», acronyms that denote fear, uncertainty and doubt , which flooded the market, reduced profitable entities to 76% . “This means that 24% of all chain entities currently have UTXOs that are in losses,” the report asserts. In a bull market context, this compares to three periods in 2011, 2013 and 2016. This metric also highlights the proportion of the market that bought higher currencies, which have losing positions, that could become panic-driven sellers .
Analysis of bitcoin sellers
Glassnode distinguishes three main groups of holders that they could generate offer on the sell side. First, it mentions losing BTC holders, who are largely buyers from the last 3-4 months . Next, consider earning coin holders who might believe that the bull cycle has already peaked. Finally, there is the group of miners who would need to sell to cover costs or are forced due to new Chinese regulations, the report says.
There is no doubt that a large part of the activity of Recent spending was driven by short-term headlines, those who own coins purchased in the last 6 months. The spent production age bands show that the age bands 1 to 3 months and 3 to 6 months in particular, increased substantially more than the typical baseline before and during the mass sale.
Glassnode.
When the behavior of short-term holders is compared with that of longer-term investors, the opposite situation is seen, highlights Glassnode . “They sell their BTC much earlier, probably rotating the capital to capture the price above the performance of BTC at that time,” he says.
Using this metric, it is found that the unrealized losses are between 9% and 9.5% of current market capitalization, says the report. This equates to about $ 65 billion worth of BTC in loss.
Despite being a historical capitulation event in relation to the size of the market, the value of the losing positions in the chain is, actually relatively small, the report highlights. “We can compare this with relative unrealized losses of 44% in March 2020 and more than 114% in November 2018”, say the authors.
Regarding the behavior of the miners, the report indicates that there are indications that the sales pressure of these may increase in the short term, as a result of changes in the mining industry in China .
With the current correction of bitcoin, part of the capital that usually flows into that cryptocurrency has begun to migrate to ETH, according to an investigation by Glassnode, commented on by CriptoNoticias on May 11.
