Realized Losses

Recent on-chain analysis by Glassnode has shown that the current Bitcoin bear cycle is playing out as the worst one in history.

Several factors have contributed to making the current crypto bear market the worst ever recorded as most Bitcoin traders are underwater and continue to sell at a loss, according to Glassnode.

Blockchain analysis firm Glassnode’s June 24 report titled A Bear of Historic Proportions outlines how Bitcoin’s current dip below the 200-day moving average (MA), negative deviation from realized price, and net realized losses have conspired to make 2022 the worst in Bitcoin’s history.

“In the midst of this, Bitcoin and Ethereum have both traded below their previous cycle ATHs which is a first in history. “

The first and most obvious indication of a bear market is when the spot price of Bitcoin (BTC) falls below the 200-day MA and an even more extreme scenario, the 200-week MA. To highlight how rare the current price levels are, Glassnode showed that during the 2022 bear market, Bitcoin has fallen below half the 200-day MA level.

Glassnode also demonstrated that falling below 0.5 the Mayer Multiple (MM) is an exceedingly rare occasion that hasn’t happened since 2015. The MM factors in price changes above and below the 200-day MA to show overbought or oversold conditions. The report states, “Only 84 out of 4160 trading days (2%) have recorded a closing MM value below 0.5.”

“For the first time in history, the 2021-22 cycle has recorded a lower MM value (0.487) than the previous cycle's low (0.511).”

Confirming the severity of current market conditions is the spot price falling below the realized price, which has forced traders to increasingly sell their coins at a loss. Glassnode noted that such a cascade effect is “typical of bear markets and market capitulations.”

Glassnode said instances when spot prices trade below the realized price are uncommon, noting that this is only the third time this has happened in the last six years and the fifth time it's happened since Bitcoin’s launch in 2009.

“Spot prices are currently trading at an 11.3% discount to the realized price, signifying that the average market participant is now underwater on their position.”

The rarity of this event is illustrated by Glassnode’s model showing that just 13.9% of all Bitcoin trading days have seen spot prices dip below realized prices.

These conditions are exacerbated by investors locking in their losses on the largest crypto by market cap. When Bitcoin fell below the $20,000 mark in June 2022, Glassnode wrote that BTC investors locked in “the largest daily USD denominated realized loss in history.”

“Investors collectively locked in a loss of -$4.234B in a single day, which is a 22.5% increase from the previous record of $3.457B set in mid-2021.”

Factoring in all the negative metrics, Glassnode assesses that the market is in the midst of a capitulation event. Cointelegraph corroborated this assessment on June 24 by pointing out that miners have started selling their stacks which is another indicator that capitulation has taken place. Such events often signify the bottom price range of a cycle.

Related: 5 indicators traders can use to know when a crypto bear market is ending

BTC is currently down 70% from its November 2021 high, trading at $21,207 according to CoinGecko.