Bitcoin has experienced a pronounced shift in market dynamics, with its seven-day average net realized losses reaching approximately $2.3 billion, the highest figure recorded since 2021. This downturn coincides with a surge in volatility, as Bitcoin trades near $66,491. According to data from Bitget Research, recent sellers—many of whom bought at higher prices—are contributing to this significant distribution of assets, underscoring a broader trend of capitulation among short-term holders.
Realized Losses Mirror Past Crises
The concept of realized loss measures the dollar value of coins sold below their on-chain acquisition price. This seven-day average effectively minimizes daily fluctuations and highlights overarching capitulation trends. Recent figures reveal a strong sell pressure from short-term holders, with CryptoRank indicating that daily net realized profit/loss (NRPL) fell to approximately negative $1.99 billion on February 7, 2024. This level mirrors figures seen during the 2022 collapse of the Luna cryptocurrency, although current prices remain significantly higher than the $19,000 range experienced during that crisis.
On-chain analyst Axel Adler Jr. noted the comparison between the two periods, emphasizing that today’s realized losses of $2.3 billion are unprecedented except for the Luna collapse. He explained that the context is different, as current losses occur at much higher price levels without a systemic breakdown. According to IndexBox, for the first time since October 2023, realized losses moved into net territory over a 30-day period, accumulating approximately 69,000 BTC in losses valued at nearly $6 billion. This data suggests that short-term participants are largely driving the sell-side activity.
In light of these developments, Glassnode has cautioned that failing to reclaim key on-chain cost-basis levels may heighten market vulnerability. If a significant portion of supply remains underwater, further price declines could provoke additional selling from recent buyers.
Market Volatility and Institutional Caution
As Bitcoin hovers around $66,491, volatility remains markedly high. The price currently sits below both the 50-day and 200-day simple moving averages. The relative strength index is near 31, indicating diminished momentum without providing a clear directional forecast. Major banks are adopting a more cautious stance; for instance, Standard Chartered has revised its year-end projections, highlighting a reserved institutional outlook rather than a definitive market prediction.
High levels of realized losses can either precede deeper market drawdowns or signal the formation of a price base. Much will depend on whether spot prices can reclaim dominant cost-basis bands for recent buyers. Should these levels fail to hold, market fragility could increase as more supply remains at a loss. Current market data indicates a trend of cyclical deleveraging and cohort rotation, rather than a systemic market failure.
To accurately assess market stress, it is essential to review absolute loss figures alongside acquisition prices and funding structures, as they do not inherently confirm systemic instability.
Korean Authorities Investigate Seized Bitcoin
In a separate development, authorities in South Korea are investigating the disappearance of Bitcoin that was seized during ongoing investigations. The Seoul Gangnam Police Station has reported losing track of 22 BTC, valued at nearly $1.5 million, which was transferred out of a USB cold wallet. Local outlet Donga first reported the incident, stating that the police received the Bitcoin in November 2021. An internal review revealed that the coins had been siphoned off, leading to the suspension of the investigation. While the physical USB device remains in custody, the digital assets were transferred without detection.
The Gyeonggi Bukbu Provincial Police Agency has launched an internal inquiry to determine how this transfer occurred, examining the possibility of internal involvement. Officials have refrained from further comments due to the ongoing investigation. This incident follows a nationwide inspection of investigative agencies, initiated after the loss of 320 BTC at the Gwangju District Prosecutors’ Office. Reports indicate that investigators mistakenly accessed a phishing website, resulting in drained assets.
These incidents add further scrutiny to the custody of digital assets, coinciding with a turbulent market characterized by heightened volatility and significant realized losses.
As the situation develops, market participants will remain vigilant, seeking clarity in both the price movements of Bitcoin and the regulatory landscape surrounding digital assets.
