Bitcoin (BTC) price is showing notable resistance at the $17,000 level, and according to data from Glassnode, a number of metrics that track the pace of selling and investor on-chain behavior are beginning to show a reduction in the factors that trigger strong liquidations.
The FTX bankruptcy prompted a historic selloff that resulted in $4.4 billion in realized Bitcoin losses. Analyzing the losses made using the daily weighted average metric, Glassnode analysts found that on-chain losses are declining.
According to Glassnode, Bitcoin hit an all-time low in the ratio of realized gains to losses. Towards the end of the most recent bull market, realized losses were 14 times greater than gains, which historically coincided with a positive turnaround in the market.
The on-chain data also shows that realized losses are decreasing and the Bitcoin price is above the balanced price and the realized cap is falling, removing excess liquidity generated by overleveraged entities.
Realized cap suggests excess liquidity has been drained
The realized cap is the net sum of capital inflows and outflows from Bitcoin since the launch of BTC.
The current realized cap is 2.6% higher than the May 2021 peak, suggesting that Bitcoin’s all-time high has receded and all excess liquidity from bad debts and overleveraged entities has been drained from the market.
In the past, as bad debts were removed from the ecosystem, a launching pad was established for future bull markets.
According to analysts:
“The 2010-11 realized cap saw a net capital outflow equal to 24% of the cap. The 2014-15 realized cap saw the lowest, though not trivial, capital outflow of 14%. 2017-18 saw a 16.5% decline in realized compounding, the closest to the current cycle of 17.0%. By this measure, the current cycle has seen the third largest relative outflow of capital and has now eclipsed the 2018 cycle, which is arguably the most relevant mature market analogue.
The balanced price and the delta price are algorithmic analyzes that are used to review previous bear cycles. In previous bear cycles, the Bitcoin price traded between the balanced price and the delta price 3.0% of the time.
The current balanced price range is between $12,000 and $15,500 with the current price delta concentrating between $18,700 and $22,900. At the same time as previous bear markets, the Bitcoin price is above the balanced price and finds support at $15,500.
While a market bottom has yet to be found, and a handful of possible catalysts to the downside remain, on-chain analysis shows that market participant sentiment is slowly coming out of bearish extremes, with peak realized losses and forced sale apparently concluded.
A tighter view of the acquisition cost of Bitcoin holders will also make it easier to anticipate reactions to potential volatility ahead. A large amount of excess liquidity has dissipated, possibly creating a firmer price floor for a sustainable BTC price recovery.
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