Several metrics tracking the pace of selling and investor behavior on the blockchain are beginning to show a reduction in the factors that trigger sharp sell-offs, according to Glassnode data. Bitcoin BTC $17,002 price is showing notable resilience at the $17,000 level.
Bitcoin suffered a $4.4 billion loss due to the bankruptcy of FTX. On-chain losses are declining based on the daily weighted average metric, according to Glassnode.
The realized profits versus losses ratio of bitcoin have reached a record low, according to Glassnode. Historically, a positive market shift occurs when realized losses exceed profits.
Bitcoin realized profit and loss. Source: Glassnode
Moreover, the on-chain data shows that realized losses are declining, and the Bitcoin price is above the balanced price, reducing excess liquidity from over-leveraged entities.
Historical realized cap trends. Source: Glassnode
Liquidity is drained from the cap
A realized cap is the net sum of Bitcoin capital inflows and outflows.
Since Bitcoin's all-time high has retraced, the market has been drained of all excess liquidity resulting from bad debt and overleveraged entities.
The removal of bad debt created a launch pad for future bull markets.
Bitcoin Realized Cap. Source: Glassnode
According to the analysts:
“The 2010-11 realized cap saw a net capital outflow equivalent to 24% of the peak. The 2014-15 realized cap experienced the lowest, yet non-trivial capital outflow of 14%. 2017-18 recorded a 16.5% decline in the realized cap, the closest to the current cycle of 17.0%. By this measure, the current cycle has seen the third largest relative outflow of capital, and has now eclipsed the 2018 cycle, which is arguably the most relevant mature market analogue.”
It could be the end
Algorithmic analyses are used to revisit previous bear cycles. 3.0% of the time in previous bear cycles, Bitcoin's price traded between the balanced price and the delta price.
A balanced price range of $12,000 to $15,500 exists with a delta price concentration of $18,700 to $22,900. Unlike previous bear markets, Bitcoin's price has found support at $15,500.
A market bottom remains elusive, and a few potential downside catalysts remain, but on-chain analysis indicates that market sentiment is slowly shifting away from bearish extremes, with the peak of realized losses and forced selling seemingly over.The ability to predict reactions to volatility will also be easier with a better view of Bitcoin holders' acquisition costs. There was a large amount of excess liquidity dissipated, possibly creating a firmer price floor.