Bitcoin Newcomers Face 93% Unrealized Losses Echoing FTX Collapse

Bitcoin futures liquidations have purged short-term holders in a $365 million ‘wipe-out,’ leaving unrealized losses at 94%, levels unseen since the FTX collapse.

In an August 7th Glassnode report, the crypto analytics firm confirmed a “statistically significant capitulation” as Bitcoin’s short-term holders (STHs) have come under intense pressure thanks to this week’s BTC price crash. Glassdoor commented:

“97% of all losses can be attributed to Short-Term Holders, and the Long-Term Holder cohort were comparatively unfazed.”

STH entities are those HODLing Bitcoin for 155 days or less, while their counterparts, the long-term holders (LTHs), HODL for more than 155 days.

STHs tend to be far more sensitive to market shocks than LTHs, and this week’s dip to $49,500 was no exception.

At one point, these newcomer entities sold $850 million of Bitcoin at a loss. However, this only scrapes the surface of the overleveraged players that have been removed from the market, according to the report.

Bitcoin Unrealized Losses Echo FTX Collapse

The analytics firm likened the significant 97% unrealized losses to those observed around the collapse of the cryptocurrency exchange FTX.

“Short-Term Holders are currently holding the largest unrealized loss since the FTX implosion, which again highlights a point of serious investor stress imposed by current market conditions,” Glassnode summarized.

Just 7% of STH holdings currently sit in profit, echoing the Bitcoin price dip below $30,000 during the sell-offs in August 2023.

“This is also more than -1 standard deviation below the long-term average for this metric, and suggests a notable degree of financial stress amongst recent buyers,” the research added.

Glassnode likewise confirmed that STHs are “dominating” on-chain losses, with just 3% attributable to the LTH cohort.

Something bolstered by various other metrics, with the research characterizing the broader market reaction to the price declines as “one of panic and fear,” as per the report.

For instance, the STH spent output profit ratio (SOPR) recorded lows surpassed on only 70 days of trading in Bitcoin’s history.

“Short-Term Holder SOPR has also reached staggering depths, as new investors locked in a -10% loss on average,” Glassdoor commented.

Bitcoin Long-Term Holders Double Down

Amidst these significant sell-offs, it appears that long-term holders are doubling down on Bitcoin.

In an X post on Aug. 8, on-chain analytics platform Santiment revealed wallets with total holdings between 10 and 1,000 Bitcoin “rapidly accumulated on the price dip that saw crypto’s top asset fall below $50,000.”

🐳 August 5th and 6th saw the highest level of Bitcoin whale transactions since the first week of April. According to the total holdings of wallets with 10 to 1,000 BTC, they rapidly accumulated on the price dip that saw crypto's top asset fall below $50K. pic.twitter.com/wLG33tIV2k

— Santiment (@santimentfeed) August 7, 2024

According to Santiment, on the two dates, there were 28,319 BTC transactions worth more than $100,000 and 5,738 transactions worth more than $1 million as crypto prices tanked.

Bitcoin shed around 18% on August 5, plunging from just over $60,000 to below $50,000 in less than a day. However, it has since recovered slightly to reclaim the $57,000 level as traders capitalized on the lower prices.

Referencing the SOPR metrics, on-chain analytics platform CryptoQuant drew similar conclusions, suggesting that current prices could mark a potential buying opportunity.

“We know that the metric last reached the 0.95 level in December 2022, which initiated a bull run,” contributing analyst XBTManager noted.

“During bull trends, the 0.95-0.90 range is usually a good buying level. Currently, the metric is at 0.90.”

Concluding, Glassnode called August an “exceptionally eventful month.”

It highlighted the significance of the recent drawdown, the largest since Bitcoin’s all-time high at a 32% drop, and the subsequent STH sell-offs that followed. It pointed to the $365m worth of contracts forced closed as the fuel to the fire, “creating a 3 standard deviation reduction in open interest.”

“This has led to a meaningful flush out of leverage, and paves the way for on-chain and spot market data to be of key importance for analysts assessing the recovery in the weeks to come.”