It may take $1B more in on-chain losses for Bitcoin to bottom out

Key points: 

• On-chain losses must equal or exceed on-chain gains from the previous bull run. Otherwise, for the most part, Bitcoin has since continued to fall.
• The current realized losses are insufficient to match Bitcoin’s historical capitulation trend, which leaves the door open for further capitulation in BTC price.
• Data from on-chain analytics firm Glassnode shows that Bitcoin is starting to prepare for a retest of all-time highs for maximum losses.

Bitcoin holders may need to triple their on-chain losses for BTC prices to hit a macro bottom.

According to market research firm Baro Virtual, the bear market in 2022 will not be enough to keep up with historical declines.

Total Bitcoin Losses 'Only' $671 Million

Bitcoin bottoming is one of the hottest topics of the month as analysts predict BTC/USD will return to or below $14,000.

That could be as simple as the algorithm for Baro Virtual, which analyzed data from the on-chain analytics platform Whalemap.

Using Whalemap's moving profit and loss (MPL) numbers for on-chain BTC trades, it found that historically, macro BTC price bottoms occur when losses from those trades are equal to or greater than corresponding gains in previous bull markets.

In other words, on-chain losses must equal or exceed on-chain gains from the previous bull run. Otherwise, for the most part, Bitcoin has since continued to fall.

"In most cases, Whalemap's monthly MPL is almost certain to hit the global bottom of $BTC", Baro Virtual wrote in Twitter comments on Nov. 22: 

“The condition is that the current loss level must be equal to or > than the max profit level of the previous bull run.”

Therefore, the current realized losses are insufficient to match Bitcoin’s historical capitulation trend, which leaves the door open for further capitulation in BTC price.

However, how much it takes could mean bitcoin’s eventual macro bottom is well below this week’s two-year low of $15,480.

"Loss is now $671 million, previous max win was between $1.3 billion and $1.7 billion," the post continued, with an annotated chart:

“Thus, losses from $629M to $1.029B are still missing to confirm complete capitulation.”

BTC targets 80% retracement

The results add to the narrative that the 2022 bear market is yet to match 2014 and 2018, the macro lows of Bitcoin’s previous two halving cycles.

From the recent all-time high set in November 2021, BTC/USD is down 77% year to date, below the previous bear market.

Still, data from on-chain analytics firm Glassnode shows that Bitcoin is starting to prepare for a retest of all-time highs for maximum losses.

Likewise, the percentage of total BTC profit currently held is almost (but not quite) at a low, equivalent to a macro low.

Charlie Bilello, founder, and CEO of Compound Capital Advisors added: “Bitcoin’s 78% drop over the past year is the largest since 2017-18 and is now the second longest at 376 days, Second only to the 410-day decline in 2013-15".