Originally published on: August 08, 2024
A recent research report from Glassnode reveals that Bitcoin speculators are facing significant losses, with over 93% of unrealized losses amounting to a staggering $365 million in a market “purge.”
The study, featured in Glassnode’s weekly newsletter “The Week Onchain,” highlights a notable capitulation among short-term holders (STHs) of Bitcoin due to the recent price crash. These STH entities, who hold Bitcoin for 155 days or less, have been hit hard by the volatile market conditions.
According to the report, the recent BTC price drop to $49,500 has led to extreme financial stress among STHs, with just 7% of their holdings currently in profit. This statistic mirrors the Bitcoin price decline below $30,000 observed a year ago, indicating a high level of investor anxiety and panic in the market.
Glassnode points out that STHs are experiencing the largest unrealized losses since the FTX implosion, further underscoring the intense pressure faced by overleveraged players in the market. The data shows that STHs are “dominating” onchain losses, with only 3% attributable to long-term holders (LTHs) who hodl Bitcoin for more than 155 days.
The research also highlights the panic and fear in the market, with metrics like the STH spent output profit ratio (SOPR) reaching historic lows, indicating a significant downturn in investor sentiment. The SOPR metric reflects that new investors are locking in an average loss of -10%, signaling a notable degree of financial stress.
Despite the grim market conditions, Glassnode sees a silver lining, suggesting that the current prices could present a potential buying opportunity. The report notes that similar market metrics have historically led to bull runs, with previous instances of extreme SOPR levels initiating significant price rallies in Bitcoin.
In conclusion, Glassnode describes August as an “exceptionally eventful month” for Bitcoin, marked by the largest drawdown from the all-time high and a significant capitulation among speculators. The report warns investors to conduct their own research and exercise caution when making investment decisions due to the inherent risks involved in trading and investing.
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