“Dramatic Capitulation” – The Great Crypto Tipping Point Looms As Bitcoin, Ethereum, BNB, XRP, Solana, Cardano, Luna, Shiba Inu, Dogecoin Price Shuffle
Bitcoin
In the wake of an impressive three-week run, the crypto market hit a pause button.
In the past week, the bitcoin price pulled back to $23,500 after breaking through the key $25,000 resistance level late Sunday night. Ethereum’s price
Altcoins are a mixed bag. XRP
Meanwhile, in the latest on-chain report, Glassnode calls a “dramatic” change in the bitcoin ownership structure, with hundreds of thousands of bitcoins changing hands from long-term bitcoin holders to new investors.
Glassnode tweeted: “After a dramatic capitulation event, the ownership structure of bitcoin has been reshaped. As markets sell off, bitcoin migrates from weaker hands to those entering the lowest.”
Such migration, as their analysis shows, is the canary in the coal mine that often signals the beginning of a structural bull market.
Zoom out
There are two important on-chain metrics and, probably more importantly, the variance between them that gives us some insight into who has been the biggest bitcoin sellers of late.
The first is the “Long-Term Holder Cost Basis” (LTH-Cost Basis). It estimates the average price at which long-term bitcoin holders bought their coins. As of mid-July, the LTH Cost Basis was $22,300, meaning that even at today’s prices, the average long-term bitcoin holder is still up.
The second is the “Long-Term Holder Spent Output Profit Ratio” (LTH-SOPR), which shows how much profit or loss long-term holders realized after actually selling their coins. According to Glassnode, in July, long-term owners of bitcoin realized an average loss of -33%.
This discrepancy between LTH-Cost Basis and LTH-SOPR tells us that the biggest sellers in this year’s route were those who bought in near the top and took some of the biggest losses.
And who did they sell to? Short-term holders.
According to Glassnode data, since Luna
So what is essentially happening is that bitcoins are migrating from those who bought in at the peaks and are most price sensitive to those who bought bitcoin on the last few days and are less price sensitive.
Which is a dynamic that historically marked bottoms in bitcoin.
As Glassnode wrote in the note I covered in last week’s Meanwhile in Markets: “For a bear market to reach a final floor, the proportion of coins with losses should primarily be transferred to those least sensitive to price, and with the highest conviction.”
Looking forward
That said, much of the conviction that brought new bitcoin investors relies heavily on a flurry of positive news.
First, July’s better-than-expected inflation rate put investors back in good spirits, boosting most risk assets. Since mid-July, the S&P 500 and Nasdaq have rallied more or less in line with bitcoin.
Bitcoin
Earlier this year, Fidelity added bitcoin as an option to its 401k plans and BlackRock
Meanwhile, lawmakers in the US and EU are hammering out sweeping crypto legislation that would subject traditional assets to regulations for crypto, which could finally legitimize bitcoin in many institutional portfolios.
So if these developments don’t change course, bitcoin could be in for a strong comeback. On the other hand, with so much hope priced in, a lot can go wrong.
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