Crypto Insights Firm Looks at State of Bitcoin On-Chain, Reveals the Likely Catalyst of Last Weekend’s Sell-Off


Crypto analytics firm Glassnode is looking behind the scenes at Bitcoin’s on-chain data and suggests that one major catalyst drove the recent steep price correction for BTC.

Glassnode tells its 408,000 Twitter followers that a massive flush out of excess leverage from Bitcoin’s derivatives market was the likely sell-side driver behind BTC’s crash to a low of $43,563.

Bitcoin futures markets have experienced a significant deleveraging event, with over $5.4 billion in open interest closed yesterday.

Total futures open interest declined from $22 billion to $16.6 billion in one day, a decline of 24.5%”

Source: Glassnode/Twitter

The firm also takes a look at which entities on the Bitcoin network were taking the majority of the pain when BTC collapsed. According to Glassnode’s data, Bitcoin belonging to long-term holders remained relatively unchanged during the correction, suggesting that investors fresh into the market were the ones that were dealt the most damage.

“Question is, which cohort of Bitcoin holders were realizing these losses?

If we look to long-term holder supply, we can actually see their total holdings are unchanged over the past week. This makes it more probable it was recent buyers…

The short-term holder (STH) SOPR (spent output profit ratio) metric, on the other hand, shows very significant losses were realized by this cohort. Spending by STHs was the least profitable it has been since the $29,000 lows set back in July.”

Source: Glassnode/Twitter

The insights firm says the liquidation cascade on December 4th was one the largest capitulation events in Bitcoin’s history.

“Bitcoin holders realized the third-largest on-chain capitulation in history over the weekend, with over $2.18 billion in realized losses.

This compares to:
– $1.38 billion in March 2020
– $2.65 billion in May
– $3.45 billion in June.” 

At time of writing, Bitcoin is trading at $50,848, down over 26% from its all-time high above $69,000.

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Featured Image: Shutterstock/liu yongqiang/Konstantin Faraktinov

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