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Nearly 50% drop in a week, what are Bitcoin Hodlers doing?



The Bitcoin market has just experienced the largest deleveraging event since the sell-off wave in March 2020. The BTC market price fell from a one-week high of $59,463 to a low of $31,327, a drop of more than 47%. It reached $28,136, setting a new historical record. The drastic price changes, mainly driven by something called FUD, have been so severe that many people are starting to wonder whether the bull market in 2021 is still alive. This week we will review the magnitude of this pullback, and the reactions of various entities observable on-chain. The scale of realized on-chain losses this week exceeds all previous capitulation events, including the sell-offs in March 2020, November 2018, and January-February 2018 (at the end of the last bull market). The graph below shows USD losses from moving coins and shows a new high of $4.53 billion in losses on May 19th, which is more than 300% higher than the previous peaks in March 2020 and February/April 2021 , was the peak weekly realized loss total of $14.2 billion. In the past week, 100,000 ETHs have been added to the pledge of the consensus layer (formerly ETH2) contract address: March 30, according to data monitoring on the Tokenview chain, the current balance of the consensus layer (formerly ETH2) contract address is 10800210 ETH. 101,232 ETHs were added, and the number of transactions was 188,312. [2022/3/30 14:26:17] Even taking into account the coins that were profitable during the selling period, this capitulation event is still the largest in history. On May 19, the net loss on the chain exceeded 2.56 billion US dollars. This is 185% higher than the sell-off during the COVID-19 panic in March 2020. The chart below shows that this capitulation followed a period of strong net profit redemption (green spikes), so it could be considered the opposite reaction to the downtrend. This suggests that a significant portion of the market was taken by surprise by the event. These on-chain net losses lead to a decline in Bitcoin’s Realized Cap. This week, Bitcoin’s realized market capitalization has fallen by $7 billion (-1.8%) from its all-time high of $377 billion. The top 1000 Ethereum whales ranked among the top 10 Tokens in the past week, and FTT jumped to the second place: According to news on March 4, according to whalestats data, among the top 10 Tokens that the top 1000 Ethereum whales increased in the past week, FTT jumped to second. In addition to ETH and Stablecoin, MATIC, BEST, OKB, MANA and CHSB ranked sixth to tenth respectively. [2022/3/4 13:37:01] Looking at the number of independent entities on the chain that are currently profitable, we can see that the current FUD turmoil has reduced the number of profitable entities to 76%, which means that 24% of the entities on the chain Currently in the state of holding underwater UTXO. This is comparable to the three periods of 2011, 2013 and 2016 in a bull market context. This metric also highlights the proportion of the market that buys high value coins (potentially panic sellers). In this wave of selling, there are mainly three types of main selling entities: holders who have bought BTC in the past 3-4 months and are in a state of loss; holders who believe that Bitcoin has reached the top of the cycle and are in a state of profit There are those who need to sell BTC to cover costs, or miners who are forced to sell BTC due to China's new regulatory trends; analysis | The total transaction volume of Ethereum DEX projects in the past week totaled 35.21 million US dollars: According to the data on the DAppTotal DEX special page: as of now , 17 DEX projects based on the Ethereum network have been counted, and the transaction volume on the chain in the past week totaled 186,696 ETH, totaling 35,212,253 US dollars. Overall, the DEX projects ranked by the number of trading users in the past week are: Uniswap (9,272), IDEX (7,280), ForkDelta (1,346), Eth2dai (999), Bancor (889) ); ranked by user transaction volume, the DEX projects with the largest transaction volume are: Uniswap (76,089ETH), Eth2dai (53,747ETH), IDEX (27,507ETH), Tokenlon (18,141ETH), DDEX (8,948ETH). [2/3/2020] There is no doubt that a large part of the recent sell-off has been driven by short-term holders, who own bitcoins purchased in the past 6 months. The spent input coin age bands show, especially the 1-3 month and 3-6 month coin age band peaks, significantly higher than the typical baseline before and during the sell-off. If we compare this to the situation of long-term investors, especially those who hold 1-3 year old BTC (buy side of the previous cycle), we see the opposite. Quotes | Bitcoin futures returned to $4,000 for the first time in the past week: CME Bitcoin futures BTC May contract closed up $100, an increase of more than 2.56%, to $4,005. The CBOE Bitcoin futures XBT May contract closed up $100, up more than 2.56%, to $4,000. [2019/3/28] The currency holders in the 1-3 year currency age group actually transfer the currency much earlier, and it is likely to rotate capital to capture the price performance of ETH at that time. However, in this wave of capitulation, spending on coins aged 1-3 years has actually decreased significantly, and the proportion of these coins in total activity has also declined. This shows that the old leeks are neither panic selling nor eager to exit. A major remaining question is, what is the size of the unrealized losses, or in other words, how many coins are still underwater that could be panic-sold? We checked the Relative Unrealized Losses metric, which represents the ratio between the total underwater value and the current market cap. Using this metric, we can see that about 9.0% to 9.5% of the current BTC market cap ($700 billion) is unrealized losses, which equates to about $65 billion in underwater value. Even though this is a historic capitulation event, the value of the underwater position on-chain is actually relatively small relative to the size of the market. We can compare this to a relative unrealized loss of 44% in March 2020 and over 114% in November 2018. Quotes | Bitcoin futures fell below $3,800, a new low in more than a week: CME Bitcoin futures BTC April contract closed down $45, or about 1.18%, to $3,775. CBOE bitcoin futures XBT April contract closed down $22.50, down more than 0.59%, to $3787.50. [2019/2/27] Please note that before the mass sell-off, coins with higher purchase prices basically had a "store of value" with a higher market cap. After the sell-off, the new market cap is lower, so it is possible to realize a relative unrealized loss of more than 100%. Looking at the entire bitcoin market, the net unrealized profit and loss indicator (NUPL) has fallen back to a level just below 0.5, and this level has played a supporting role in the previous three bull market cycles, which is actually the market in 2021. bottoming out for the first time. However, if we filter out short-term holders, we can see that a major capitulation has occurred. The total unrealized losses currently held by short-term currency holders are -33.8% of the currency's market value. This value can be compared with the most extreme time periods in the history of Bitcoin, including: the top of the first bull market in 2013; Three bear markets in 2014-2015; four bear markets in 2018; a capitulation wave in March 2020; In mining, there are rumors that due to changes in China's mining industry, the selling pressure in the mining industry may increase in the short term. Observing the consumption of miners' coins shows that although the amount of coins transferred by miners to exchanges has increased (from 100 BTC/day to 300 BTC/day), this is still a relatively small amount of the ~900 BTC/day circulation part. This is confirmed by the miners net position change indicator. We can see that the total accumulation has decreased slightly this week, but the proportion of "mined and held" coins is still relatively large compared to "mined and sold". It remains to be seen whether miners will start spending more coins as these regulatory changes unfold. Finally, we investigate changes in exchange inflows, balances, and leveraged derivatives markets during the week. Exchange net deposits increased significantly in the weeks leading up to and during the sell-off. On May 17, the peak net inflow soared to over +30,000 BTC per day. At the same time, the size of the outflows has been steadily increasing as the price of BTC has fallen, suggesting that even if there is a broader market decline, there will still be buyers stepping in. An interesting observation is that divergence in the exchange market is taking place, with some exchanges seeing growth in BTC balances, while most balances are relatively flat or even declining. Aside from a small increase during this week’s sell-off, these exchanges have effectively maintained an uninterrupted balance decline since March 2020. However, there are three exchanges that are basically in a state of net inflows. They are Binance, Bittrex and Bitfinex, and the balances of these three exchanges have been increasing in 2021 (among them, Binance has the highest proportion of inflows). Amid this sell-off, the BTC balances held by all three exchanges have seen substantial increases. Given that all three of the aforementioned exchanges serve clients outside the United States, this could mean that markets in different jurisdictions react differently. Another explanation is that Binance occupies a large share of the trading market and derivatives, and it is the gateway to the Binance Smart Chain, which is the preferred place for retail investors to speculate in the near future. Finally, in the derivatives market, Bitcoin futures open interest has dropped significantly from April’s new high. Open interest across all futures markets is down over $16.4 billion (60%) from its peak and has now recovered to February 2021 levels. The options market has seen a similar sharp decline, with total outstanding contracts down 52% from its peak and now down to $6.4 billion, back to February levels again. Overall, this speculative and leveraged flush is a healthy and necessary process that eliminates excessive speculation. Note: The original author is glassnode data analyst CHECKMATE.


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