Crypto Capital Reset Is In Progress After Final Rinse

A major capital reset is underway, according to on-chain analytics provider Glassnode. In its Dec. 5 “week on-chain” report, the company said the collapse of FTX prompted “one of the biggest deleveraging events in digital asset history.”

Markets have consolidated just above these cycle lows since the FTX crash in early November. Additionally, there has been a slight increase in on-chain activity, but nothing substantial enough to catalyze larger price moves just yet.

Glassnode looked at the magnitude of the losses suffered by all market participants during the massive deleveraging event.

These flushes are nothing new in the crypto markets, and forcing out over-leveraged positions is healthier for longer-term price discovery. High leverage is generally unsustainable for any asset class.

Record surrender event

There have been two historic surrender events this year, in June and November. The latest FTX event resulted in a record $4.43 billion one-day loss, according to Glassnode.

However, the June selloff, which was spurred by the collapse of the Terra ecosystem, suffered over $700 million in daily losses for a fortnight.

Glassnode inspected the ratio of realized profit to realized loss, noting that it had hit an all-time low. “This indicates that market-blocked losses were 14 times larger than take-profit events,” he observed.

Previous ratio lows of a similar magnitude occurred at the bear market cycle lows of 2011, 2015, and 2018. A macro trend shift followed and a bull market began the following year in all three scenarios.

The report concluded that the magnitude of the losses has diminished in recent weeks as a result of the skidding. It is likely that the consolidation will continue for several months before a noticeable trend reversal can be measured.

Crypto Market Outlook

In the short term, crypto markets fell 1.1% on the day, bringing the total capitalization down to $892 billion. With such low conviction for the entire crypto space, resistance above current levels will be hard to break.

Bitcoin is hovering just above $17,000 after retreating from $17,400 in the last 23 hours. Meanwhile, Ethereum fell 2% into a retreat to $1,266 at the time of writing, according to CoinGecko.

Additionally, there has been very little movement in either direction for most higher-cap altcoins today.


Binance Free $100 (Exclusive): Use this link to sign up and receive $100 free and 10% off Binance Futures fees for the first month (terms).

PrimeXBT Special Offer: Use this link to sign up and enter code POTATO50 to receive up to $7,000 on your deposits.

Leave a Comment