The sharp pullback in the cryptocurrency market in recent weeks has driven Bitcoin investors’ realized losses to historical levels. According to analysts, this scale of loss realization usually signals that the markets are approaching bottom levels.
Crypto analyst Michaël van de Poppe stated that the losses incurred in Bitcoin following the recent decline have reached an all-time high. Van de Poppe compared the current situation to some of the biggest periods of loss in Bitcoin history. According to the analyst, the current process represents a profit-taking on a scale similar to the peak crash of the 2018 bear market, the sharp sell-off caused by the COVID-19 pandemic in March 2020, and the Luna/FTX crisis of 2022.
During the recent pullback, it’s reported that many investors sold at a loss or transferred their BTC below cost. This indicates a surge in panic selling and forced liquidations in the market. Historically, such large-scale increases in realized losses are typically seen near cyclical lows, as “weak hands” and highly leveraged positions are largely liquidated at this stage.
On the other hand, the Sharpe Ratio, which measures the risk-return balance, is also said to have fallen to its lowest level since the last low. According to the analyst, this data reveals that the market is going through a serious capitulation process and investor sentiment has hit almost rock bottom. However, the current cycle differs from previous major bear markets in one respect: Bitcoin has fallen by approximately 50% from its all-time high this time. In previous major crashes, this rate reached up to 80%.
According to van de Poppe, the fact that losses have reached historical levels and market sentiment has weakened excessively may signal the formation of a bottom in the short term.
*This is not investment advice.
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