Glassnode On-chain Weekly: Is Selling a Continuation of the Bearish Trend or a Psychological Change for Investors?

TL;DR

- As the FTX crash became final, investors' reactions became clear.

-Since the FTX storm, investors holding <1BTC have increased by 962,000 BTCs.

- In the chaotic year of 2022, the confidence of BTC holders will be tested as never before.

Original article: The Character of Capitulation
Original author: CryptoVizArt, Glassnode

The Reaction of Investors is Gradually Clear - the Momentum of Shareholding Increase is Strong

As the crypto market has experienced unprecedented sustained selling pressure, BTC has remained in the range of approximately $16,000 after several weeks of chaos.


The above figure shows the change in the balance of BTC in the past 30 days, and its index represents the size and direction of the difference in the balance (from accumulation to distribution).

🟣The closer the value is to 1, the more people in the BTC network accumulate and increase their balance.
🟡The closer the value is to 0, means that most BTC networks have been distributing tokens and begun to reduce the balance.


From the above figure we see that after the selling panic caused by the FTX crash, there has been a substantial increase in holdings. This change can be found after many major events, such as:

Panic selling in the market from November to December 2018;

The global spread of the COVID-19 pandemic in March 2020;

LUNA collapse in May 2022;

In June 2022, the price of BTC fell below $20,000 for the first time.



Of the upper chart, 🟦 (Accumulation) and 🟥 the (decentralized) trend score is used to indicate the trend change of the wallet balance when an important event occurs.


According to analysis, we can see that almost all wallets have turned to 🟦 (Accumulation) after the price of BTC continued to fluctuate and fall. It is an important signal, which not only represents a suitable buying opportunity, but also represents the signal of token transfer from the exchange to personal wallet.



Since the FTX crash, the holdings of shrimps have increased by 962,000 BTCs, and now they hold more than 1.21 million BTCs, which is equivalent to 6.3% of the total circulation of BTCs.


The figure above shows that the 7-day profit and loss trend of BTC will promote the transition of the market from a bear market to a bull market, because it can represent the confidence index held by investors.

Since November, the crypto market has experienced the fourth-largest collapse event in history - the FTX storm. After the incident, the profit and loss reached $-10.16 billion in seven days, which is 4.0 times greater than the overall market decline in December 2018 and 2.2 times greater than the global spread of the COVID-19 pandemic in March 2020.

The current market is at the bottom since the "historical bottom" in December 2018 and January 2015.


We can see that glassnode uses BTC's aSOPR index to measure the average selling and buying prices of all BTCs transferred today. Values higher than 1 represent profits, while values lower than 1 represent losses.

It can be seen from the above figure that not only the unrealized gains and losses are still "struggling" in the market, but also the realized gains and losses have reached an all-time high.



The above figure compares the two standard deviations of aSOPR 🟢 (high) and 🔴 (Low) range. It indicates the accumulated net realized profit/loss of BTC in 7 days.


In the past week, the net loss of the crypto market was equivalent to -521,000 BTC, which is close to the historical extreme value.

Conclusion

The FTX storm triggered the largest panic-selling wave in the history of cryptocurrencies. The market is still in a stagnant state to some extent, and it may take more time to fully digest the recent fluctuations.

However, this panic decline is somewhat similar to the bear market period in 2018. Investors' losses have exceeded the historical average, and the unrealized profits and losses held by the currently active BTC supply are at the lowest level in history.


2022 is a year of chaos, and the confidence of BTC holders has been tested by history as never before. But throughout history, the lowest confidence is often the best time to buy.




Author: CryptoVizArt, Glassnode Editor: Gate.io Blog
*This article represents only the views of the researcher and does not constitute any investment suggestions.