Bitcoin Investors Realized $520 Million In Losses During Recent Crash, Report Shows

The on-chain analytics firm Glassnode has revealed how the Bitcoin holders realized a large amount of losses during BTC’s trip to $93,000.

Bitcoin Realized Loss Registered A $520 Million Spike Recently

In its latest weekly report, Glassnode has talked about the recent trend in Realized Loss for Bitcoin. The “Realized Loss” here refers to an on-chain indicator that measures the total amount of loss that the BTC investors as a whole are ‘realizing’ or harvesting through their selling every day.

This metric works by going through the transaction history of each token being sold on the network to see what price it was moved at prior to this. If the previous selling price of any coin was more than the current spot price, then that particular coin’s sale is leading to loss realization.

The loss is assumed to be equal to the difference between the two prices. The Realized Loss sums up this value for all coins being sold at a loss, to determine the network total. Another indicator called the Realized Profit, similarly keeps track of the tokens of the opposite type.

Now, here is the chart shared by the analytics firm in the report, which shows the trend in the Bitcoin Realized Loss over the last couple of years:

In the graph, the Bitcoin Realized Loss displayed is the ‘Entity-Adjusted’ version, meaning that it only keeps track of the loss transactions happening between two separate entities.

An ‘entity’ refers to a collection of addresses that Glassnode has determined to belong to the same investor. There is naturally no loss realization when an investor shifts coins between their wallets, so it makes sense to exclude such transfers from the indicator.

From the chart, it’s apparent that the metric registered a significant jump earlier in the month, during which the asset’s investors realized a total of $520 million in loss.

The impetus behind this capitulation event was a crash to the $93,000 mark for the cryptocurrency’s price. As Glassnode has highlighted in the graph, this event was one of the largest for the current cycle, with only the yen-carry trade unwind $1.3 billion spike standing out as a notably larger one.

Historically, a peak in loss realization is something that has actually been bullish for Bitcoin. The reason behind this is the fact that coins tend to transfer from weak hands to strong ones during such an event. These resolute investors are more willing to hold, so the cryptocurrency tends to arrive at a bottom as selling pressure runs out.

While the recent capitulation event was quite large in USD terms, it was actually still within norms for the cycle when denoted in BTC, as the below chart shows.

BTC Price

Bitcoin has been unable to build momentum in either direction recently as its price is still finding itself consolidating around the $96,000 level.