The fall in the price of Bitcoin (BTC) has plunged long-term holders and HODlers into a state of historic loss, causing a serious decline in their conviction. Large volumes of old BTC are being moved, confirming the spending behaviour identified a fortnight ago. On-chain analysis of the situation
Surrender near the floor
Following the break of the old 2021-22 bear cycle low ($18,000), the price of Bitcoin (BTC) is quietly moving near new lows around $15,000.
“Figure 1: Daily BTC price” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/1.GRAPH-GP-ON-CHAIN-1-1536×864-1.jpg” width=”1536″ height=”864″ /☻
Highly undervalued relative to short and long term cost bases, the market is pushing more and more holders to give in to selling pressure.
A continuing trend in the spending of old BTC indicates that a loss of advanced conviction is taking place across the most resilient groups of participants.
Extreme market undervaluation
Bear markets are those periods when the Bitcoin price is so severely depreciated that it signals a rare investment opportunity for the most resilient participants.
Heavily undervalued relative to short- and long-term cost bases, the market is currently pushing more and more holders to give in to selling pressure, causing a redistribution of the supply in circulation.
Using the various pricing models that have been developed (representations of the cost of acquiring 1 BTC for a given cohort), we can see that the BTC price is currently below the total on-chain cost base.
This end-of-bear cycle context is very similar to that recorded following the final capitulation in December 2019, where the short-term realised price (STH, in pink) had served a second time as resistance to a potential price recovery.
“Figure 2: Realised prices (average, STH and LTH)” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/2-3-1536×864-1.jpg” width=”1536″ height=”864″ /☻
These various on-chain patterns now represent upward barriers that BTC will need to overcome in order to signal a sustainable uptrend.
The MVRV ratio is an indicator that measures the degree of latent profitability in the market by dividing the spot price of BTC by the average realised price of all newly created UTXOs.
Indicating whether the pot price is over/undervalued relative to its “fair value”, this indicator has been registering values below 1 since June, confirming that we are in a price territory conducive to building generational savings.
“Figure 3: MVRV ratio” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/3-3-1536×864-1.jpg” width=”1536″ height=”864″ /☻
With a value of 0.81, the MVRV ratio indicates that the market is incurring an average unrealised loss of -19%, with the aggregate acquisition price of 1 BTC being $20,200.
Historically, only 615 days have passed where this ratio has moved into an undervalued state, which is equivalent to 13.7% of the time in the entire history of the bitcoin market.
The STH variant of the MVRV ratio measures the degree of profitability of UTXO less than 155 days old. These BTCs are associated with short-term holders, highly sensitive behaviour to market volatility and limited resilience.
“Figure 4: STH-MVRV ratio” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/4-3-1536×864-1.jpg” width=”1536″ height=”864″ /☻
With a value of 0.87, the STH-MVRV indicates that short-term positions hold an average unrealised loss of -13%, with an aggregate acquisition price of $18,800, not far from the consolidation support that took place from June to November 2022.
With 1541 days below the value of 1 (undervalued state), short-term holders have been in loss for 34.3% of the entire market history.
For long-term holders with a multi-year investment horizon and a strong belief in bitcoin, a value of 0.87, the LTH-MVRV indicates an average unrealized loss of -29%.
“Figure 5: LTH-MVRV ratio” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/5-3-1536×864-1.jpg” width=”1536″ height=”864″ /☻
The aggregate acquisition price for UTXO over 155 days old is around $22,900, so it appears that this cohort of participants is suffering the most financial pain.
This is partly due to a generalized HODLing behavior of these entities, who prefer to endure huge losses in the long run rather than give in to pressure like their short-term counterparts.
In doing so, they lock in their latent losses, preventing the redistribution of their assets to new entrants. This allows them to spend almost half as much time in an undervalued state as STHs (14.2% of market time).
Loss of conviction of Bitcoin HODLers
However, in response to a further drop in profitability, long-term holders and HODLers continued their bearish redistribution.
Giving in to selling pressure and making losses of around -40%, these entities are finally making a form of capitulation visible on the channel.
One measure of the age of spending that highlights this dynamic is Days of Parts Destroyed (Dpd). Measuring the time between the creation of a UTXO and its destruction, this metric increases as old UTXOs are spent and rejuvenated.
“Figure 6: Days of Parts Destroyed” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/6.9-3-1536×864-1.jpg” width=”1536″ height=”864″ /☻
By applying a 7-day exponential average to this measure, we can highlight periods of high rejuvenation (greater than or equal to 25 million JPD).
What stands out in the above chart is the structural increase that this metric has been subjected to since October, indicating a continuous and increasing rejuvenation behaviour.
The Liveliness metric corroborates this observation by recording a continuous rise of unprecedented magnitude during the current down cycle.
Indicating that the cumulative Days of Coins destroyed over the past few weeks is considerable, the following chart highlights that old BTC spending behaviour is currently dominating against HODLing behaviour.
“Figure 7: Bitcoin liveliness” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/7.10-2-1536×864-1.jpg” width=”1536″ height=”864″ /☻
With the current rise in Vivacity being much larger and more sustained than those recorded during the price capitulations of May and June 2022, it seems that the latest bearish move has finally succeeded in shaking the conviction of some long term investors.
This is a concrete sign of final market capitulation, as FTX’s collapse and loss of $18,000 support has finally pushed the most resilient participants to sell, initiating a redistribution of losses to new buyers.
Recent spending volumes of BTC over 6 months old support this thesis by indicating that a considerable cleanup of positions is underway.
“Figure 8: Spent volume older than 6 months” src=”https://www.todayscrypto.news/wp-content/uploads/2022/12/8.11-2-1536×864-1.jpg” width=”1536″ height=”864″ /☻
With over 50,000 BTC spent since the loss of the old floor, the last few weeks have seen more old coins sold than in May and June 2022 combined.
Testifying to the advanced loss of conviction taking place across the most resilient groups of participants, the current spending dynamics are the most intense on record since the end of the bull market in January 2021.
At that time, long term holders were making significant profits in the strength of the bull market, a behaviour that is the opposite of the current situation.
Summary of this on-chain analysis
In sum, this week’s data indicates that the break of the old 2021-22 bear cycle low ($18,000) has plunged all cohorts of holders into a historically low latent loss state.
With the spot price below both short and long term cost basis, the market has pushed many entities to succumb to selling pressure.
This is particularly the case for long term holders and HODlers, whose spending pattern indicates that an advanced loss of conviction is currently taking place and is a continuation of the data seen a fortnight ago.
