On-chain data shows that Bitcoin investors are not participating in significant amounts of loss sales at this time. Here’s what it can mean.
Bitcoin Entity-Adjusted Realized Loss has been staying low lately
This is evident from data from the on-chain analytics company Glasnode, recently traded coins were usually bought near the current spot price. The relevant indicator here is the ‘entity-adjusted realized loss’, which measures the total loss investors realize from their current sales.
This metric works by going through the on-chain history of each item sold to see what price it was bought at. If this previous price for a coin was higher than the current spot price (at which it is now moving), selling the coin results in the realization of a loss. Of course, the coin would move with a profit in the opposite case.
The indicator is “entity adjusted” as it only counts transactions/sales between different entities rather than individual portfolios. An entity here refers to a single address or group of addresses controlled by the same investor, as determined by Glassnode’s analysis.
Since transfers between the same investor’s addresses do not count as sales, it makes sense to filter such transfers from the data for the realized loss.
Now, here’s a chart showing the trend in Bitcoin’s entity-adjusted realized loss over the past few years:
The value of the metric seems to have been moving sideways in recent days | Source: Glassnode on Twitter
As the chart above shows, Bitcoin’s entity-adjusted realized loss has been at relatively low levels for a few months now. The price increase of the cryptocurrency has occurred during this period, so it would make sense that investors would not have to sell at a loss while the increase continues.
Lately, however, things have been different. BTC has fallen in recent weeks, but there is still no change in the value of the indicator. This is different from what is generally observed during withdrawals in the asset.
Even earlier in the current year, when the March rally had stalled temporarily and the cryptocurrency’s value had taken a deep plunge, there was an increase in realized loss, albeit not too significant. The recent lows are also despite the FUD that has spread across the industry following the SEC indictments against Binance and Coinbase.
Over the past day, the market has stumbled again as the Fed announced its decision to temporarily suspend rate hikes, but also announced more hikes later in the year.
Despite this new blow to the Bitcoin price, the realized loss has still not increased as the value is still only $91.3 million, significantly less than previous capitulation events.
The fact that investors have not yet started selling at a loss would mean that there is not enough panic in the market yet; Losing investors are satisfied with the current market phase-out.
BTC price
At the time of writing, Bitcoin is trading around $25,000, down 5% over the past week.
Looks like BTC has observed a sharp drop today | Source: BTCUSD on TradingView
Featured image from Thought Catalog on Unsplash.com, charts from TradingView.com, Glassnode.com
