As can be seen from cryptocurrency exchange websites, the BTC market is currently at a low, and that means a lot of newer members are suffering significant losses. This might remind some of a similar instance that happened in May 2021. The SOPR (Spent Output Profit Ratio) ascertains the ratio of profit of the crypto market space to know if crypto adopters and traders are at a gain or loss. The analysts working there released the chain data and looking at them, the crypto signal does prove that the BTC market is currently on a bear trend and bitcoin holders might have to weather the storm. The on-chain metric works by checking the price at which the coin was bought on the chain relative to the selling price.
A value higher than one indicates a net gain within a given timescale whereas a SOPR value below one shows holders at a loss when selling their coins. Consequentially, if the value is exactly at 1, the bitcoin or other crypto investors were equalizing within that period of time. What does this bearish signal mean? It means a lot of short-term holders are at a loss as things stand, and this issue has been exacerbated by the US Government’s announcement that it is going to sell off bonds. This is a move aimed at reducing the nation’s balance sheet. Due to this, there was a record number of BTC trading. The Government generally buys bonds as a means to keep the interest low. However, this kickstarted a rise in bond yields as reported by CNBC.
Within this same timeframe, several coins including bitcoin fell. These cryptocurrencies taking a nosedive led to massive crypto lossesfor bitcoin holders. The bearish movement has entered the new year, with the BTC market suffering a 6% reduction in the selling price of bitcoin between the 4th and 7th of January, 2022. Within that time period, the analysis pointed to the fact that bitcoin traders endured a cumulative loss of beyond $50 billion dollars. Even the market capitalization dropped to almost 818.04 billion from $868.38 billion. These are large numbers that are reflected in the trading sites like redot.com where the fall is very apparent on the graph.
With the premier crypto falling down the side of the hill, bitcoin news chart outlet, Coinmarketcap, reported the value of the coin’s asset melted from $45,987.58 to $43,153.57, a loss of $2,744 because of the pressure bitcoin holders had to sell before it got any lower. Now, investors are said to be considering running to bonds with better rates as a storage oasis for their funds while the cryptocurrency market tries to get back to a bull trend.
Bitcoin short-term holders are reeling from the huge losses they are seeing, and this can be seen in the data gathered about how many crypto adopters liquidated their positions. During this tumultuous time, over 207,000 investors left their positions and the decentralized space lost more than $800 million worth of crypto trades. It remains unclear where all this money will be redirected to, but it wouldn’t be surprising to see an uptick in the bonds market.
A BEAR SIGN FOR CRYPTO
The crypto signal is a bear sign for bitcoin, and this shows in the realized losses which appraise the worth of every coin that was sold at a lesser value than they were purchased. Hence, realized losses basically check to find out the cumulative number of coins moved out at a loss and how that reflects in monetary value.
After the bull rise started in March 2021, realized losses have gotten to the highest that they have ever been in. That was on the 20th of May, the same time when bitcoin dropped immensely by roughly $20,000 from around $57,000 to $37,000. They went up again on the 26th of June when bitcoin had a further drop towards almost $30,000. Ever since that, though, the changes in realized losses have been mundane thanks to the upward movement of the bitcoin. At the end of the year, however, bitcoin experienced a steep decline in its value, pushing it from near $60,000 to $42,000 in the span of seven days. As expected, realized losses shot up to over 1.2 billion dollars which is one of its highest annual values to this day.
Another good indicator is the Net Realized Profit/Loss indicator. This explores the net value of daily BTC markets. It is accrued by subtracting realized losses from realized profits that occurred during that day. Between May and June and December as well, the indicator showed three downward spikes. Contrary to the realized loss, the profit/loss presented the worst time as June with regards to profit and loss, meaning there was more profit gotten on May 20 than June 26 than losses suffered on June over May.
Coin Days Destroyed is another form of analysis on the decentralized network that assesses the lifespan of coins sold BTC market by bitcoin investors. A high indicator would mean crypto coins are being hoarded for a longer period of time. The CDD did not spike on the 4th of December which alludes to most of the coins being sold belonging to people who have not had their coins for a considerable amount of time. That would correlate well with the high indicator of realized losses due to the fact that short-term coins would be costlier and hence, bought at a higher market during BTC trading. Bitcoin has shown little signs that it is going to overturn its bearish trend. It is still not evident when this will stop, so we’ll just have to buckle up and see.
Crypto losses every now and then are part of the norm and should be expected, but it is easier said than done to accept significant losses. What will people now do as they start realizing that crypto bitcoin is on a bear trend? Whatever they choose to do, it won’t change the efficacy of the BTC market. The crypto market cap will only grow higher and higher despite inevitable bearish curves.