Surrender underway but markets not yet at their lowest: Glassnode

Bitcoin’s wealth is being distributed from weak to strong hands due to continued capitulation from retail investors and miners, signaling that bottom may be near.

Blockchain analytics firm Glassnode’s latest “The Week On-Chain” report from July 11 explains that market capitulations have been going on for about a month and several other signals suggest bottom formations in Bitcoin prices.

However, analysts at Glassnode wrote that the bear market “always requires an element of duration” as long-term (LTH) holders, who tend to have greater confidence in Bitcoin as a technology, are increasingly supporting the greater the greater unrealized losses.

“For a bear market to reach an ultimate bottom, the share of coins held at a loss should be shifted primarily to those with the least price sensitivity and with the highest conviction.”

They added that the market may need “additional downside risk to fully test investors’ resolve and allow the market to establish a resilient bottom.”

Unrealized losses are losses in the dollar value of a holder’s position before the sale.

Glassnode made this assessment based on the observation that during previous bear markets in 2015 and 2018, LTH held over 34% of Bitcoin (BTC) supply that was in unrealized loss. The proportion of STH accounted for only 3% to 4%.

Currently, short-term holders (STH) hold 16.2% of losing coins, while LTHs hold 28.5%. Coins are moving towards new STHs that aim to speculate on the price but have less conviction on the asset, he added.

The proportion of LTH holding lossy coins may still be too low.

This implies that as LTH picks up more coins, they must have diamond hands, meaning they must not sell, for analysts to note a true bottom in the market. Cointelegraph echoed this idea by acknowledging that Delphi Digital also believes it takes longer under current market conditions to call it bottom.

Related: Despite ‘Worst Bear Market Ever’, Bitcoin Has Been More Resilient, Glassnode Analyst Says

Bitcoin miners selling coins are proof that the market could be testing low ranges. Glassnode demonstrated that miners have sold 7,900 BTC since late May, but have recently slowed spending to around 1,350 BTC per month.

Duration is again highlighted as a critical factor in determining where the market bottom might be. During the 2018-2019 bear market, the miners’ capitulation took about four months to bottom out; they’ve only been selling in 2022 for about a month or two. Miners are still holding around 66,900 BTC, so “the next quarter is likely to continue to be dispensed unless coin prices recover significantly,” the report concludes.

Overall, Glassnode noted that the market appears close to bottom, saying it “has many characteristics of the later phase of a bear market,” but investors should be aware that other pains could be in store. at the store.

“Overall, the fingerprint of widespread capitulation and extreme financial stress is certainly in place.”

Bitcoin was down 3% in the past 24 hours, falling below $20,000 to $19,939, according to CoinGecko.