Bitcoin Crash Forced Weak Hands Into Largest Loss-Taking Since 2022 Lows: Report

A new report from Glassnode has revealed that the Bitcoin short-term holders took part in the largest loss-taking event since 2022 in the recent crash.

According to the latest weekly report from Glassnode, less than 1% of trading days in the cryptocurrency’s history have seen the short-term holders taking higher losses than during the latest event.

The “short-term holders” (STHs) here refer to the Bitcoin investors who bought their coins within the past 155 days. This cohort makes up one of the two main market divisions based on holding time, with the other group being called the “long-term holders” (LTHs).

Statistically, the longer an investor holds onto their coins, the less likely they become to sell them at any point. As such, the LTHs reflect the stubborn side of the market, which can weather through crashes and rallies, while the STHs include the weak hands that easily react to FUD or FOMO.

Given this fact, it’s not unexpected that this latter cohort has again shown a strong reaction to the recent volatility in the Bitcoin price. And since it’s been a crash, the STHs have been panic selling at a loss.

The below chart shows the trend in the Bitcoin Realized Loss specifically for the STHs over the past few years:

The Realized Loss here is an indicator that keeps track of the total loss the STHs realize through their selling. Also, note that the metric is “entity-adjusted,” meaning that the metric includes the data for entities instead of addresses.

An entity refers to a cluster of addresses that Glassnode has determined to belong to the same investor through its analysis. Transactions made between the wallets of the same investor would naturally not correspond to any real “loss-taking,” so excluding them from the data makes sense.

As is visible in the graph, the Bitcoin STH Realized Loss registered a spike during the latest market downturn, implying that these investors made large transactions at a loss.

At the height of this capitulation event, the indicator’s value hit $595 million, the largest loss-taking the cohort has shown since the FTX collapse that led to the bottom of the 2022 bear market.

“Furthermore, only 52 out of 5655 trading days (< 1%) have recorded a larger daily loss value, highlighting the severity of this correction in dollar terms,” reads the report.

From the chart, it would appear that large spikes in the metric have come around at least local bottoms in the price, so this loss-taking event may have also formed another bottom for Bitcoin.

At the time of writing, Bitcoin is trading at around $58,800, up 3% over the past week.