Bitcoin has entered a rare moment of heavy market stress. A CryptoQuant report dated February 13 shows that the network has just recorded around $2.3 billion in realized losses on a seven-day average.
That level places the move among the top loss events ever seen, comparable to the 2021 crash, the 2022 Luna and FTX collapse, and the mid-2024 correction.
Hidden losses occur when coins are moved or sold for a price lower than the last purchase price. In simpler terms, hidden losses indicate the extent to which investors lock in their gains on-chain.
A sudden increase in this figure indicates panic selling rather than strategic reallocation. This time, however, the figure is remarkably large. It has only been seen a handful of times in Bitcoin’s history.
Source: CryptoQuant
Bitcoin Rebounds, But Downturn Risks Still Linger
The data reveals that the selling pressure comes from short-term holders. These are investors who have held coins for less than 155 days. These investors bought coins during the price range of $80,000 to $110,000. As Bitcoin plummeted, it appears that these investors have been forced out due to huge losses.
According to CryptoQuant, long-term holders are not the cause of this price surge. Historically, long-term holders have tended to hold on during a price drop and not sell in a panic. This is important because large sell-offs tend to come from weaker hands and over-leveraged retail traders, not from the strongest hands.
The price action of Bitcoin follows this trend. After hitting a low of around $60,000, the price of BTC surged back to around $71,000. Historically, when selling dries up and relief rallies begin in extreme loss situations, such price surges have occurred. However, history also shows that such price surges do not necessarily mark the end of a downturn.
Also Read: Strategy Maintains Bitcoin Position as Market Correction Tests Investor Confidence
Long-Term Capital Flows Flash a Structural Warning
Another warning signal comes from Alphractal. It was observed that the Realized Cap Impulse for long-term holders is negative again after three years. This indicator calculates the changes in the realized market capitalization of long-term holders over a long period of time.
Source: Alphractal
It can help identify if new funds are flowing into the network or if the inflow of funds is slowing down. The realized market capitalization is different from market capitalization because it prices each coin based on the last time it moved.
When the impulse is positive, demand is catching up to supply, and investors are buying at higher prices. When it turns negative, it means that new money is slowing down or turning around. In past cycles, similar trends have been noticed during big market drops and long bear markets.
Source: Alphractal
Bitcoin is undergoing a tough period as the number of realized losses increases and the long-term gains become less strong. The transition from $60,000 to $71,000 may indicate relief from selling pressures, but the larger risk is that this may be a part of a larger period of selling.