Bitcoin Realized Losses From Entities Surges To 2022 Levels Following Crash Below $90,000

Overview

Bitcoin has recently faced significant price action that has led to a surge in realized losses among market participants, reaching levels last seen during the 2022 bear market. Data from Glassnode indicates that the current environment is characterized by fading demand, weakened liquidity, and increased stress among traders, particularly those holding Bitcoin in the short term.

Recent Price Action and Realized Losses

In the past two weeks, Bitcoin’s price has dropped below $90,000, prompting a considerable number of market participants to sell their holdings at a loss. According to Glassnode’s latest Week-On-Chain report, the realized losses among Bitcoin entities have surged, nearing levels recorded during the deep retracements of the 2022 bear market. The Relative Unrealized Loss, calculated over a 30-day simple moving average, has risen to 4.4%, a significant increase from nearly two years of remaining below 2%.

This rise in loss realization is indicative of the stress traders are experiencing due to the recent price drop. While Bitcoin has bounced back slightly from a low on November 22 to above $92,000, this recovery has not alleviated the pressures on holders. Glassnode reported that the average daily realized losses have reached approximately $555 million, reflecting a broader trend of reduced confidence among investors regarding short-term upside prospects for Bitcoin. As a result, many are choosing to reduce their exposure to the asset, even at unfavorable prices.

In contrast, long-term holders have engaged in profit-taking, with realized gains climbing to around $1 billion per day, briefly surpassing $1.3 billion. Despite this elevated distribution, Bitcoin remains positioned just above the True Market Mean, a long-standing cost-basis benchmark that typically serves as a point of structural support. The recent downturn has brought this support zone close to its limits, but there are signs of demand that may allow Bitcoin to revisit the 0.75 quantile near $95,000.

Market Conditions and Liquidity

The Glassnode report also highlights ongoing weakness in various market segments, particularly with exchange-traded funds (ETFs). After experiencing a period of strong inflows earlier in the year, ETF flows have notably cooled, which represents a significant reduction in one of the primary sources of buy-side liquidity for Bitcoin.

Additionally, spot market liquidity has diminished, with order books on major exchanges hovering near the lower bounds of their 30-day ranges. This decrease in liquidity has contributed to a slowdown in trading activity through November and into December, resulting in fewer liquidity flows available to absorb volatility or facilitate directional movements.

The derivatives market mirrors this caution, with funding rates remaining near neutral and futures open interest subdued, failing to recover meaningfully since the decline below $90,000. Across all major trading venues, the prevailing sentiment is one of caution, with liquidity thinning and participants adopting a defensive stance rather than pursuing potential short-term rallies.

From author

The current situation in the Bitcoin market underscores the challenges faced by traders amid heightened uncertainty and changing market dynamics. The significant rise in realized losses indicates a shift in sentiment, with many investors opting to sell at a loss rather than risk further declines. The interplay between long-term holders realizing gains and short-term traders facing losses paints a complex picture of the market’s current health.

Impact on the crypto market

• Realized losses among Bitcoin entities have surged, reflecting significant stress in the market.
• The increase in loss realization indicates a lack of confidence among short-term investors.
• Long-term holders are actively taking profits, contributing to market dynamics.
• Weakness in ETF flows signals reduced buy-side liquidity for Bitcoin.
• Diminished spot market liquidity may exacerbate volatility and hinder price recovery.
• Overall market sentiment remains cautious, with participants leaning defensive rather than pursuing aggressive trading strategies.