– In a previous issue, it was highlighted that based on the level of realized losses, unrealized losses and capitulation trends in the past, we had yet to see a bear case capitulation play out.
– Today, as bitcoin hovers above a critical $28,000 price and technical level, weve yet to see major capitulation play out in the broader equities market as bitcoin reaches its all-time highest equity market correlations.
– The key on-chain price areas to watch are still those that make up the cost basis. Currently the markets realized price is around $24,000 while long-term holders realized price is around $17,000. As short-term holders realize losses, short-term holders realized price has dropped to around $48,000.
– If were to get the long-term holder market capitulation weve seen in the past, theres potentially more downside to come.
– The bitcoin market value to realized value ratio indicates a cooled, but not yet overcooled period indicative of market capitulation bottoms.
– Capitulation-like sell-offs across broader cryptocurrencies, in BTC terms, played out over the last few days with Luna losing 98.76%.
– High-beta investments relative to bitcoin are getting crushed year-to-date and especially this week as second-order effects of the Terra (UST) blowup ripple through the market.
– Whether its a repricing of protocol risks, forced selling, liquidations and/or damage control from UST and LUNA exposure, the entire market is selling off much worse than bitcoin.
– Although bitcoin was hit in the larger sell-off across the market, all other crypto assets were hit much harder, as shown by the chart above which is using BTC as the benchmark.
– It is also worth noting that if 2022 brings an extended period of consolidation/bear market price action, the fully diluted market cap of many altcoins is much larger as a percentage of market cap today (i.e., further inflation/dilution of the asset).
– Monetary properties matter over the long run, which is why we remain laser-focused on the prospects of bitcoin and choose to dismiss other projects in the crypto space.