Data from the Bitcoin chain suggests that Bitcoin buyers who bought at the top might have lost their way. This trend was last seen in July 2021. A new bull rally followed.
A lackluster Bitcoin sell-off may indicate that top buyers have already capitulated
As per the latest weekly report from Glassnode, there hasn’t been any significant loss realization recently despite world-changing events taking place this week.
The relevant on-chain indicator here is the “net realized profit/loss,” which tells us whether the overall Bitcoin market is realizing profits or losses right now.
To calculate the metric, you look at each cryptocurrency on blockchain to determine its most recent price. The coin will be sold for profit if its current price is lower than its selling price. Investors who make large profits generally cause a correction of the price.
However, a higher buying price than the current would indicate a loss. A large number of losses in Bitcoin can indicate widespread capitulation.
Here’s a chart showing the trends in BTC net profit/loss for the last year.
Source: Glassnode's The Week Onchain - Week 9, 2022| Source: Glassnode's The Week Onchain - Week 9, 2022
It appears that a net loss of money has occurred recently, as you can see from the graph. The magnitude of the losses, however, is quite small, even with the huge bearish Russia-Ukraine conflict this week.
These events are usually followed by capitulation in markets where there is a significant negative indicator spike.
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This could indicate that people who purchased Bitcoin at the top may have already disposed of their Bitcoins during the capitulation events.
This report also highlights a commonity between the current trend chart and the chart during the May–July minibear period.
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The three previous negative spikes that preceded the rally were quite similar. However, the second was much less severe. This trend seems to be quite similar.
If there is any pattern, the third spike may indicate that a new Bitcoin bull market rally could be starting soon.
BTC price
At the time of writing, Bitcoin’s price floats around $43.5k, up 15% over the last week.
Source: BTCUSD on TradingView| Source: BTCUSD on TradingView
Unsplash.com's featured image. Charts by TradingView.com. Glassnode.com's charts.