More recently, the capitulation of the Bankman-Fried-led popular exchange FTX has further amplified this negative trend. In addition, exchanges like Gemini and Coinbase have laid off a significant chunk of their workforce.
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According to Glassnode reports, the collapse of FTX has led to one of the largest; deleveraging events in the history of crypto. As a result, the market has dipped in recent weeks. Glassnode emphasized the size of losses felt by all market players in the deleveraging event.
In the long term, this forced-priced flush-out might prove beneficial to the prices of assets. However, Glassnode also believes that a capital reset is at hand.
How Is The Crypto Market Faring?
With current events, the crypto market has pulled back 1.1%. The total market capitalization stands at $892 billion. With the fear and uncertainty high in the market, resistance levels will be tough to break through for any asset.
Most altcoins have maintained neutrality today- neither posting significant gains nor losses. Bitcoin is close to the $17,000 level retracing from $17,400 in less than 24 hours; Ethereum has pulled back 2%, retreating to the $1,266 level. The crypto market is generally downtrend today with a reduction in market capitalization.
Record Breaking Capitulation
Two massive capitulations reshaped the crypto space in 2022. The events; occurred in June and November. The FTX saga led to a loss of $4.43 billion in one day. Terra’s capitulation caused a deficit of $700 million in 14 days as investors withdrew their capital in droves.
Glassnode compared the ratio of realized profits to realized loss, with the latter outstripping the former. As per the data, these losses were fourteen times larger than the gains in the market.
According to historical data, previous ratio lows of similar effect occurred at the cycle of bottoms. Again, this pattern was observed – in the 2011,2015, and 2018 bear markets.
After these significant losses, a trend shift occurred after each bear market – leading to a bull market in all three years.
Glassnode stated that the size of the losses had reduced in recent weeks after the crypto flush-out. The prices will likely consolidate – in the coming months before a significant trend reversal.
Cryptocurrency market trades sideways | Source: Crypto Total Market Cap on TradingView.com
According to CNBC’s Jim Cramer, investors need to cash out on crypto while they can. However, with the recent event that has created a negative impression on crypto investment, Cramer emphasized that the decision be made sooner rather than later. How investors will react to the flush-out, and its resultant effects remains a mystery.