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Recent BTC crash was hardest on newcomers

Photo of: Joseph Stone
by Joseph Stone

Bitcoin recorded the most significant decline in its history. It is the result of misleading information and massive sales by recent BTC buyers.

Hard to argue with that. Week 21 was historic for Bitcoin, but for negative reasons. Since late 2020, the value of BTC had accustomed investors to dithyrambic comments. This time, the record is of a different nature.

The market had not seen such a sell-off since the March 2020 sell-off and the beginnings of the COVID-19 pandemic. As a result, Bitcoin lost just over $28,000 in value, falling back to $31,327.

The fundamentals of Bitcoin remain, however. For Glassnode, this fall is primarily a consequence of FUD (fear, uncertainty and doubt). Erroneous or catastrophic information would explain the panic among investors.

“The price action has been heavily influenced by what can only be described as a FUD-bath, with topics from every chapter of the bitcoin critics’ handbook,” Glassnode comments.

The consequences are severe. The dollar value of realized losses on BTC peaked at $4.53 billion on May 19. “This figure is more than 300% higher than previous peaks in March 2020 and February/April 2021 and is the peak of a total weekly realized loss of $14.2 billion. “

However, these losses do not affect all Bitcoin holders. The first to be affected are recent BTC purchasers (within the last 6 months). Holders of tokens for 1 to 3 years have suffered fewer losses.

The “spend of 1-3 year old coins was significantly less and decreased as a proportion of total activity. This suggests that former holders did not engage in panic selling or rush to the exit. “

In fact, Decrypt notes, the number of large whales – wallets containing 10,000 or more bitcoins – was increasing over the period. That number rose from 85 to 90. Conclusion: the drop in the BTC price was an opportunity to accumulate more tokens.

However, the value of Bitcoin must rise again to avoid further, still latent, losses. Glassnode estimates that about 9.0% to 9.5% of the total capitalization ($700 billion) are unrealized losses. That equates to $65 billion.

“While this is a historic capitulation event, relative to the size of the market, the value of the underlying positions on the chain is actually relatively small. We can compare that to relative unrealized losses of 44% in March 2020 and over 114% in November 2018,” Glassnode points out, however.