Bitcoin & Top Assets See High Loss Taking, Is This Bullish?

Keshav Verma

1 year ago

3 mins read

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On-chain data shows Bitcoin and the other top assets are observing a high amount of loss-taking currently. Here’s what this could mean.

Investors Of Bitcoin & Other Top Coins Are Capitulating Currently

According to data from the on-chain analytics firm Santiment, the current trader capitulation that the largest assets in the market are seeing may be a bottom signal.

The indicator of interest here is the “ratio of daily on-chain transaction volume in profit to loss,” which, as its name already implies, tells us how the profit-taking volume for any given coin compares with its loss-taking volume right now.

When this metric has a positive value, it means that the profit-taking volume is higher than the loss-taking volume currently. Thus, such a trend implies that the market as a whole is harvesting profits at the moment.

On the other hand, the indicator having negative values suggests loss taking is the dominant behavior among the traders of the cryptocurrency in question right now.

In the context of the current discussion, the assets of relevance are Bitcoin (BTC), Ethereum (ETH), XRP (XRP), Litecoin (LTC), and Cardano (ADA).

Here is a chart that shows the trend in the ratio of transaction volume in profit to loss for these assets over the last few months:

Looks like the value of the metric has been negative for all these assets in recent days | Source: Santiment on X

As displayed in the above graph, the indicator’s value for all these top assets has dipped inside the negative territory recently. This high loss realization from the investors has come as the market as a whole has been unable to amass together any significant rally.

From the chart, it’s visible that these assets have seen the investors capitulate at different points throughout the year, but the current capitulation event has an interesting feature that was missing from these previous instances: the loss-taking is currently happening for all these large cryptocurrencies.

It would appear that traders as a whole have finally started to give up on the market after experiencing endless consolidation, as they are ready to take losses in order to make their exit.

The scale of the loss-taking itself is also extraordinary, as the only other time this year that the loss volume overtook the profit volume to this degree was way back in March.

Historically, capitulation from investors has made bottoms more probable to form. And from the above chart, it’s visible that the March capitulation also leads to Bitcoin hitting a bottom.

The likely reason behind this pattern is that the investors who exit in losses are generally the weak hands, who had a low conviction in the asset, to begin with. In capitulation events, the coins that they sell at losses are picked up by the more resolute investors, and hence, the market gains a stronger foundation for building up rallies.

It’s possible that the high loss taking that Bitcoin and the others are experiencing currently may also lead to a bottom, if the historical precedence is anything to consider.

BTC Price

At the time of writing, Bitcoin is trading around $29,100, down 2% in the last week.

BTC continues to move inside a narrow range | Source: BTCUSD on TradingView

Featured image from Art Rachen on Unsplash.com, charts from TradingView.com, Santiment.net

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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