Key Points
- Bitcoin purged market speculators following a “correlation-1” event.
- Liquidations reached $365 million, according to Glassnode data.
In a new report, Glassnode reveals important data about a mid-cycle wipeout that saw huge liquidations amongst short-term holders (STH).
A Black Monday occurred on August 5 which saw declines across both equity and digital asset markets, following a “correlation-1” event, as noted by Glassnode.
A “correlation-1” event typically refers to a situation in financial markets where assets that usually show little to no correlation suddenly start moving in the same direction with a correlation coefficient of almost 1. In other words, during such an event, the returns of different assets become highly positively correlated.
August 5 saw a notable decline in equities and assets markets and Bitcoin was no exception, as Glassnode notes.
On Monday, Bitcoin recorded its largest drawdown of the cycle, seeing price drops from above $58,000 to levels below $50,000.
Bitcoin STHs – The Largest Unrealized Loss Since FTX
Bitcoin short-term holders came under high pressure following this week’s Bitcoin price crash. STHs are entities holding BTC for 155 days tops, while long-term holders (LTHs) hold for more than 155 days.
STHs are more sensitive to market volatility compared to LTHs and the beginning of this week and the market decline confirms this.
Glassnode reveals the extent to which overleveraged traders have been removed from the market.
In their notes, Glassnode revealed that STHs are currently holding the largest unrealized loss since the FTX implosion which highlights a point of serious investor stress imposed by current market conditions.
The evaluated percentage of STHs supply held in profit shows that 7% of the supply is held in a profitable position, which is similar to the sell-off in August 2023.
Glassnode also noted that this is also more than -1 standard deviation below the long-term average for the metric, suggesting significant financial stress amongst recent buyers.
SOPR Reaches Staggering Depths
Glassnode mentioned another metric Short-Term Holder SOPR that reached significant depths, as new investors saw -10% loss on average.
This is a form of capitulation with only 70 trading days ever registering a lower value.
$365M in Total Liquidations
Glassnode revealed data related to derivatives markets where a large volume of long positions were forced closed with a total volume of $275 million worth of long contracts liquidated.
Also, $90 million in shorts were liquidated, bringing the total liquidations to $365 million. This shows how many leveraged speculators were purged from the market.
Regarding Bitcoin‘s price today, at the moment of writing this article, BTC is trading above $57,000 following the August 5 price dip below $50,000.
