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Why is Bitcoin’s Crash Different from LUNA & FTX? Discover the Key Reasons!
In the latest bitcoin news, on-chain analytics firm Glassnode has highlighted how the recent Bitcoin selloff stands apart from the infamous LUNA and FTX collapses of 2022. Understanding these differences is crucial for investors navigating the current market volatility.
Glassnode’s analysis centers on a key indicator known as the Percent Supply in Profit. This metric gauges the percentage of Bitcoin’s circulating supply that is currently holding unrealized gains. By comparing this with historical data from previous crashes, Glassnode offers valuable insights into the current market dynamics.
Understanding Percent Supply in Profit
The Percent Supply in Profit is derived from Bitcoin’s transaction history. Essentially, it assesses each token’s last transfer or sale price. If this price is lower than the current market value, the token is considered to be in profit. Glassnode aggregates these coins to calculate what percentage of the total supply they represent. Conversely, the Percent Supply in Loss tracks tokens that are currently at a loss, allowing for a comprehensive view of market sentiment.
At the beginning of the month, Bitcoin’s Percent Supply in Profit reached an impressive 100% when the cryptocurrency hit its all-time high (ATH). However, as the selloff began, this figure remained above 90%. This indicates that most investors were still in profit, suggesting that the recent downturn was largely driven by profit-taking, predominantly among top holders.
Contrasting Market Conditions with Previous Crashes
During the LUNA and FTX crashes, the landscape was markedly different. At those times, the Percent Supply in Profit fell below 65%. Glassnode has also analyzed the Net Realized Profit/Loss, another critical metric that assesses whether profit-taking or loss-taking prevails in the Bitcoin network. During those significant events, the Net Realized Profit/Loss showed deep negative values, indicating widespread capitulation among investors.
It’s noteworthy that during the collapse of Three Arrows Capital (3AC), the market experienced a higher Percent Supply in Profit, yet also faced a notable increase in loss-taking. This juxtaposition of metrics emphasizes the unique nature of the current situation.
Glassnode’s Conclusion: A Structurally Different Event
Given these observations, Glassnode characterizes the latest Bitcoin crash as “a structurally different, leverage-driven event.” This perspective highlights the impact of market psychology and the behavior of investors, particularly in how profits are managed during periods of volatility.
At the time of writing, Bitcoin is trading around $110,400, reflecting an over 11% decline in the past week. This downturn serves as a reminder of the inherent risks in cryptocurrency investments, but also underscores the importance of understanding market indicators like the Percent Supply in Profit.
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In conclusion, the recent Bitcoin selloff is not just another crash; it represents a different market structure influenced by profit-taking behaviors and investor sentiment. As the crypto landscape continues to evolve, staying informed about these trends will be essential for making informed investment decisions.
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