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Coin Circle (120BTC.com) News: On-chain data analysis company Glassnode issued its latest weekly report the day before (18), saying that Bitcoin and the broader digital asset market have experienced one of the most severe and rapid repricing events in history. This process cleared a large amount of excessive leverage in the market and caused the price of Bitcoin to be lower than the realized price (the estimated cost basis of Bitcoin holders) for more than 1 month.

Glassnode shared a chart pointing out that in previous bear market cycles, after the price of Bitcoin was lower than the realized price for a period of time, the bottom of the bear market would really take shape, and the duration of the price being lower than the realized price ranged from 7 days in March 2020 to 301 days in 2015. If the March 2020 incident (a flash crash accident) is excluded, the average duration of being lower than the realized price is 197 days, but the current market has only lasted 35 days.

In order to establish a market bottom, Glassnode said that Bitcoin investors usually need to experience a large-scale capitulation event, forcing sellers to sell, which in turn causes seller exhaustion. Similar events have occurred twice in the Bitcoin market in May and June 2022.

According to Glassnode data, after the collapse of UST and LUNA in May, Bitcoin had a total realized loss of $27.77 billion on a 30-day basis in May; when the price of Bitcoin fell below the peak of the previous bull market in 2017 in June, the realized loss in June jumped to a record $35.55 billion. Both realized losses were unprecedented.

Glassnode's view is that as retail and short-term investors are driven out of the market during these large-scale sell-offs, the proportion of long-term holders who are not sensitive to prices will rise accordingly. As the proportion of long-term holders increases, the price of cryptocurrencies will be more stable and the market will be more likely to bottom out.

According to different holding times, Glassnode divides the distribution of Bitcoin into two parts, one is "hot money" (Hot
Money) that holds coins for less than 3 months, and the other is "long-term holders' money" (HODLer Money) that holds coins for more than 3 months. It is found that hot money has a structural downward trend in the proportion of Bitcoin market value, and has now fallen below 20%.

Glassnode pointed out that more than 80% of the total realized market value of Bitcoin denominated in US dollars has not moved for at least three months. This behavior is very similar to the performance of the Bitcoin bear market bottom in 2012, 2015, and 2018, which means that most of the Bitcoin supply is dormant, which is also one of the many signals that the Bitcoin market is approaching seller exhaustion.

Conclusion

Glassnode finally concluded that the Bitcoin market has experienced a large and rapid adjustment in 2022, driven by the unwinding of excessive leverage, as well as excessive forced selling and liquidation. In a relatively short period of 7 months, Bitcoin has slipped from an all-time high to the bottom of the bear market.

However, Glassnode said that if the current market structure is explored through indicators such as unrealized losses and realized losses to find signals of seller exhaustion, it will be found that the current market is similar to the lows of most bear markets in the past, although the current bear market is relatively short-lived.

Glassnode believes that against the backdrop of extremely challenging macroeconomic and geopolitical turmoil, the proportion of high believers and long-term holders is reaching a saturation peak, and the true bottom of Bitcoin is taking shape, which may be in progress.