Bitcoin long-term holders are beginning to suffer losses matching those from previous bear markets. And even more than that.
Long-term Bitcoin holders are sitting on their largest losses since the March 2020 capitulation and the 2018-2019 bear market but may have to keep waiting for relief.
Glassnode believes the pain may continue, and even get worse.
Bitcoin holders experience huge losses
Calculated by measuring the value of coins deposited to exchanges, aggregated realized losses from long-term holders (LTH) of Bitcoin (BTC) exceeded 0.006% of the market capitalization by May 29 according to Glassnode’s The Week Onchain report from June 6.
However, the dramatic losses may continue for some time if historic loss patterns from previous bear markets are to be repeated. From 2018 to 2019, LTH losses reached a peak of 0.015% of the market cap, and those losses extended for about a year. The current losses to long-termers have only been observed for about a month.
Glassnode writes that LTH losses now resemble those from previous bear markets, but that they need to continue for a longer period of time before being truly comparable.
Glassnode defines LTH as a holder that has not moved their coins for at least 155 days. However, anyone that bought BTC before December 2019 will still be up on their investment … for now.
It is also worth noting that in both 2019 and 2020, prices rapidly recovered by bouncing off their lows. Cointelegraph reported on Tuesday that there will likely be a capitulation event before any significant price recovery can take place.
Despite the gloomy price outlook, inflows to digital asset investment products such as Bitcoin exchange-traded funds (ETF) topped $100 million last week. Most of the inflows were from the Americas, suggesting that European investors are still bearish.
CoinShares also pointed out the difference in exchange flows between BTC and Ethereum (ETH). BTC exchange inflows have netted about $506 million in value through 2022 so far, whereas ETH has had net outflows of $357 million. This suggests that market sentiment for ETH is much lower than that for BTC at the moment.
What’s going to happen with Bitcoin
We at cryptolife.report have already covered the reasons why Bitcoin is about to recover anyway.
The bear Bitcoin market has come and is here to stay for a while.
The market’s fate doesn’t look to settle anytime soon as the bears are all geared up. They dragged the global crypto market down by almost 20% over the past day. The overall trading volume reached $1.14 trillion and has left the market to bleed.
Bitcoin fell below $27,000 briefly and is traded at $29,500, at the time of writing. Last time we saw such was more than a year ago.
Experienced bitcoiners are rather calm and quiet. They are pretty sure that whatever happens Bitcoin price is going to recover. And strive for new records. As it always does. They like to quote an anonymous trader who once said “when in doubt zoom out”, which basically means that Bitcoin is always to recover despite any obstacles.
But less experienced investors are mortified by things they see today.
Bitcoin will recover inevitably
Bitcoin was supposed to become an ultimate weapon against inflation and uncertainty. And now it is falling down swiftly washing away the investments that were made actually trying to avoid exactly this kind of disaster.
But it the other thing that matters much more and evidently makes all hopes for Bitcoin to recover rather real.
Way too many investors used to see crypto as a safe heaven to keep money away from the general volatility and uncertainty. And it happened so that cryptocurrencies have imperceptibly turned into just one more financial instrument that is highly dependent on the same factors that influence stock market.
So now, after the current crypto crash many investors will be scarred off. And will go someplace else to look for the ways to preserve their wealth. Bitcoin will be left with the majority of users who genuinely believe in crypto and its role into society.
The narrative will be changed. Bitcoin will not be seen as a hedge against inflation, which it obviously is not and was never supposed to be.
We will see the disconnect between Bitcoin and overall market trends and macro factors. That would be a great way for Bitcoin to recover and gradually gain momentum again.