FTX Collapse Triggers One of the Largest Capitulations by Bitcoin Holders

FTX collapse led to capitulation among bitcoin investors, comparable to the bleakest episodes of previous bear markets. Glassnode analysts reached that conclusion.

As the dust settles after the FTX debacle, the critical question is whether the sell-off can be better characterized as a continuation of the bearish trend, or a potential trigger of a deeper psychological shift amongst #Bitcoin investors.

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— glassnode (@glassnode) November 28, 2022

In November, the fourth-largest capitulation in history was recorded. The seven-day realized loss averaged $10.16 billion, four times higher than in December 2018 and 2.2 times the level seen in March 2020.

The bitcoin-denominated realized loss (smoothed seven-day moving average) stood at 521 000 BTC.

«If we compare the current aggregate net realized loss with the indicators from COVID and the Luna crash (price declines of 44% and 39%, respectively), the market showed greater resilience with a correction of only 26%», the analysts noted.

The price of the leading cryptocurrency remained below its realized price for the last 4.5 months. The sell-off has nudged market participants from distribution toward accumulation.

The trend is evident across almost all categories and most pronounced among addresses holding less than 1 BTC. Since the FTX crash, their aggregate balance has risen by 96,200 BTC, and their share of the total supply has climbed to 6.3%.

Unrealized losses among speculators (purchases over the last 155 days averaging $18,830) reached 12%. The market has entered a bottoming phase, characterised by seller exhaustion and a shift toward a balance of distribution and accumulation.

From an on-chain perspective this is evidenced by the fact that the “cost basis” of short-term investors’ purchases has fallen below the realized price.

Relative to Bitcoin’s market capitalisation, unrealised losses across all investor types stood at 56%. In previous bear phases the indicator also exceeded 50%.

In November, the pace of monthly outflows of bitcoins from exchange balances to cold wallets reached 106,000 BTC, according to Glassnode.

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