Bitcoin (BTC) has “cleansed” the market of speculators as liquidations hit $365 million, according to new research.
In their latest weekly newsletter, “The Week Onchain,” cryptocurrency analytics firm Glassnode identifies a “statistically significant capitulation.”
Bitcoin Unrealized Losses, Similar to FTX
Bitcoin short-term holders (STH) have been under tremendous pressure this week due to the BTC price crash.
As Cointelegraph reported, at one point these new firms sold $850 million worth of BTC at a loss. Now, new research from Glassnode shows just how far overleveraged players have been removed from the market.
An STH entity is an entity that has held a specific BTC for 155 days or less, while a corresponding long-term holder (LTH) is an entity that has held it for 155 days or more.
STH tends to be much more sensitive to market shocks than LTH, and this week’s surge to $49,500 was no exception.
Glassnode summarized, “Short-term holders are currently experiencing the largest unrealized losses since the FTX crash, which once again highlights the significant stress that the current market conditions are causing for investors.”
Currently, only 7% of STH holdings are in profit, a figure similar to the situation when the BTC price fell below $30,000 a year ago.
“This is also more than -1 standard deviation below the long-term average for this indicator, suggesting a significant level of financial stress among recent buyers,” the research report added.
Glassnode also confirmed that STH is “dominant” in on-chain losses, with only 3% of losses attributed to the LTH cohort.
A variety of other indicators have offered similar insights into the speculators’ downfall, with the survey characterizing the broader market reaction to the price decline as “panic and fear.”
For example, the STH Consumption Output Profit Ratio (SOPR) metric hit its lowest level in just 70 days in Bitcoin history.
“Short-term SOPRs have also reached incredible depths, with new investors seeing losses of -10% on average,” The Week Onchain commented.
“A Particularly Eventful Month” for Bitcoin
SOPR has not gone unnoticed elsewhere. In one of its August 7 Quicktake blog posts, on-chain analytics platform CryptoQuant came to a similar conclusion, suggesting that the current price could be a potential buying opportunity.
Related: BTC Price, Analysis Shows 2 Bitcoin Dead Crosses, Watching CME Gap at $58,000
“We know that the indicator last reached the 0.95 level in December 2022, and that’s when the bull market began,” contributing analyst XBTManager said.
“During an uptrend, the 0.95-0.90 range is usually a good buy level. The current indicator is at 0.90.”
In conclusion, Glassnode called August “an exceptionally eventful month.”
“Bitcoin recorded the largest drawdown (-32%) from its cycle ATH, triggering a statistically significant capitulation among short-term holders. Futures liquidations fanned the flames, forcing $365 million worth of contracts to close, and reducing open interest by 3 standard deviations,” he wrote.
“This has meaningfully flushed out leverage, paving the way for on-chain and spot market data to become critical for analysts assessing the recovery in the coming weeks.”
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.