Bitcoin Analysis: Losses Reach Record Highs, Is A Trend Reversal Coming?

In today’s analysis, we will look at two on-chain indicators namely Realized Loss and Net Realized Profit / Loss Ratio to see where Bitcoin may be in the bear market right now.

The realized losses are now comparable to those of 2014 and 2018, when Bitcoin hit the bottom of time. Has Bitcoin’s price dropped already, or could it be soon?

Bitcoin: Realized Losses

Realized losses are losses (in US dollars) of all moving coins that were bought at a higher price before the last move.

The 7-day simple moving average hit its second high on May 18, 2022. It was only during the May 2021 crash, when Bitcoin’s price dropped from $ 59,000 to $ 30,000 in a matter of days, that this moving average hit a higher value.

Even if the current decline in prices is much smaller (from $ 40,000 to $ 26,700), the realized losses are comparable.

Source: Glassnode

Now let’s look at the long-term chart. There we find more clues as to why Bitcoin’s price may be near the bottom. in one tweet On May 18, 2022, an on-chain analyst published @therationalroot chart with realized losses and gains weighted by market capitalization.

He then drew a horizontal black line where realized losses peaked and Bitcoin’s price hit lows at the same time. The current market capitulation appears to be comparable to the end of the December 2018 bear market, the March 2020 Covid crash and the aforementioned May 2021 crash.

Bitcoin Realized Profit / Loss Chart
Twitter source

The analyst, however, emphasizes that the current macroeconomic situation is different this time and therefore the current downward move may continue. Finally, he asked his followers: “Will bitcoiners work this time?”

BTC: Net Realized Gain / Loss

Now let’s take a look at the Net Realized Profit / Loss Indicator for more information on the current bitcoin market. In the long term chart below you can see the net gains or losses (gains-losses) of all the coins that move.

The seven-day SMA index recently hit a new all-time record of $ 1.28 billion. However, if we look at the data so far, we can see that Bitcoin’s price may not necessarily be near the next bottom.

For example, the indicator reached previous highs in February 2018 and May 2021 (blue circles). In both cases, there has been a sharp drop in the price of Bitcoin.

Subsequently, the BTC price hit lower levels even though the indicator did not drop even after that. A bullish divergence (blue lines) developed over several months.

Bitcoin Realized P / Ls 7-day SMA chart
Source: Glassnode

Moreover, only in the second case was it reached a new all-time record, namely July 2021. In the first case, the price of Bitcoin actually hit the macro bottom of $ 6,000 later, but no bottom. After a short-term uptrend, the price of bitcoin declined and then hit a low of $ 3,000 in December 2018.

Realized Bitcoin Loss

@SwellCycleanother popular cryptocurrency analyst also posted a chart on Twitterwhere he made similar comparisons to the bottom of the 2014 and 2018 bear markets. It showed that realized losses (in terms of bitcoin, not US dollars) coincided with the lowest bitcoin prices connected in two different ways.

At the end of the bear market 2014, I needed this only downward motion or wave realized losses before the BTC price hit the bottom. In 2018, there were a total of two such downward movementsbefore Bitcoin’s price then hit rock bottom. Currently, there has only been such a downward movement.

BTC chart
Source: Twitter

Will there be a second such wave and the price of Bitcoin will drop even below $ 26,700? The analyst replied: “If I look at it closely, I would say that both the 2014 and 2018 scenarios have a similar probability.”

So if the 2014 scenario repeats itself, Bitcoin’s price has already hit its lowest level. If the same thing happened in 2018, we will see another wave of realized losses. In addition, the price of Bitcoin would then drop even lower. This scenario also fits with the realized net gain or loss analysis as the bullish divergence has not yet developed from the last low of the indicator.


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