August saw a major market sell-off, affecting equities and digital assets, triggered by a “correlation-1” event.
Periods of widespread decline in global markets are usually rare, happening during times of significant global stress, deleveraging, and increased geopolitical risk.
On Monday, both equities and digital assets experienced sharp sell-offs as the unwinding of the yen-carry trade led to market deleveraging. US treasuries surged amid recession fears, and bitcoin saw a 32% drop from its all-time high, marking the most severe decline of the current cycle.
According to Glassnode, this drawdown “precipitated a statistically significant capitulation amongst short-term holders.”
August Hits Bitcoin Short-Term Holders Hardest
Despite staging a light recovery above $57,000, Glassnode data suggests that the short-term holders are now facing their largest unrealized losses since the FTX collapse, highlighting significant investor stress due to the current market conditions.
“August has already been an exceptionally eventful month across both equity and digital asset markets after a “correlation-1” event sparked a major market sell-off. Bitcoin recorded its largest drawdown (-32%) from the ATH of the cycle, and precipitated a statistically significant capitulation amongst Short-Term Holders.”
The blockchain intelligence platform also found that just 7% of their supply is held in a profitable position and is similar to the sell-off in August 2023.
The sell-off caused a wave of investor panic, which resulted in approximately $1.38 billion in realized losses. This ranks as the 13th largest event in history in USD terms, as per Glassnode’s estimates. Notably, 97% of these losses were borne by short-term holders, while long-term holders remained largely unaffected.
Investors were found to have primarily reacted with panic and fear, selling BTC significantly below their acquisition prices.
Additionally, the Short-Term Holder SOPR also plummeted to “staggering depths,” with new investors incurring an average loss of 10%. This indicates a form of capitulation, with only 70 trading days ever recording a lower value.
Who’s Accumulating?
Bitcoin whales have continued to accumulate significant amounts of the crypto asset over the past month despite the market decline. During this period, over 404,448 BTC, worth $22.8 billion, has been moved to permanent holder addresses.
This was observed by CryptoQuant’s Ki Young Ju who further added that entities such as traditional finance institutions, companies, or governments might announce significant Bitcoin acquisitions in Q3 2024.