Bitcoin

when

Swing

<p>The on-chain analysis platform Glassnode has just unveiled a set of innovative indicators that accurately locate the capitulation points and significant latent losses of Bitcoin investors. This new framework offers a better understanding of the supply-demand dynamics and helps identify potential market bottoms.</p>
<h2 id="h-bitcoin-a-new-framework-to-evaluate-seller-exhaustion">Bitcoin, a new framework to evaluate seller exhaustion</h2>
<p><a href="https://www.cointribune.com/en/the-fate-of-bitcoin-in-jerome-powells-hands-heading-towards-65000-or-a-retreat-in-sight/" target="_blank" rel="noopener noreferrer nofollow">Bitcoin bull markets</a> are marked by high volatility, punctuated by phases of correction. Glassnode observes that long-term holders (LTH) incur losses primarily during macro-cyclical slowdowns.</p>
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<p>In contrast, short-term holders (STH) incur losses at all stages of the market cycle and represent the majority of losses in bull markets.</p>
<p>By specifically analyzing the STH cohort, which includes day traders and swing traders (weekly to monthly horizon), Glassnode seeks to identify <a href="https://insights.glassnode.com/the-week-onchain-week-20-2024/" target="_blank" rel="noopener noreferrer nofollow">capitulation periods</a> of sellers. The objective is to detect inflection points during corrections within a dominant bull trend.</p>
<p>Seller capitulation is defined as an oversold point where most potential sellers have already sold. This coincides with an influx of demand from buyers, helping to form a local bottom. Inflection points tend to propagate from shorter to longer timeframes.</p>
<figure class="wp-block-image size-large"><img decoding="async" width="1024" height="589" src="https://www.cointribune.com/app/uploads/2024/05/image-17-1024x589.png" alt="LTH/STH realized loss: analyzing losses by holding duration. (Glassnode)" class="wp-image-692879" srcset="https://www.cointribune.com/app/uploads/2024/05/image-17-1024x589.png 1024w, https://www.cointribune.com/app/uploads/2024/05/image-17-300x173.png 300w, https://www.cointribune.com/app/uploads/2024/05/image-17-768x442.png 768w, https://www.cointribune.com/app/uploads/2024/05/image-17-1536x884.png 1536w, https://www.cointribune.com/app/uploads/2024/05/image-17.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px">
 <figcaption class="wp-element-caption"><em>Realized losses by LTH/STH according to holding duration. (Source: Glassnode)</em>
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<h2 id="h-three-key-indicators-to-evaluate-investor-pressure">Three key indicators to evaluate investor pressure</h2>
<p>Glassnode relies on three metrics to model the extreme financial pressure experienced by investors:</p>
<ol>
 <li>The MVRV ratio (Market Value to Realized Value) which evaluates latent gains and losses.</li>
 <li>The SOPR ratio (Spent Output Profit Ratio) which measures the average magnitude of realized profits/losses.</li>
 <li>Realized losses in USD crystallized by the cohort.</li>
</ol>
<p>For day traders, who are highly sensitive to price variations, the MVRV oscillates rapidly between high and low values. Glassnode focuses on moments when the MVRV Z-Score is below -1σ (sigma), revealing statistically significant selling pressure.</p>
<p>The SOPR confirms whether these losses have been realized by isolating Z-Scores below -1σ. Finally, realized losses in USD, with a Z-Score above +2σ, validate episodes of micro-capitulation.</p>
<p><a href="https://www.cointribune.com/bitcoin-en-chute-libre-les-traders-saignent-en-attendant-la-fed/" target="_blank" rel="noopener noreferrer nofollow">Swing traders</a> show a more gradual evolution of indicators, generating fewer signals but with a higher signal-to-noise ratio. The same methodology confirms the spread of selling pressure to longer horizons.</p>
<p>The transparency of on-chain data allows isolating the behavior of investor subsets based on their holding time. By combining three profitability indicators, Glassnode identifies micro-capitulation points accompanying local market bottoms. This framework helps decipher the incentives and actions of actors during <a href="https://www.cointribune.com/en/the-end-of-bitcoin-in-the-united-states-the-senate-takes-action/" target="_blank" rel="noopener noreferrer nofollow">phases of capitulation.</a></p>
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Bitcoin: Glassnode’s magic formula to time the market!

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