Bitcoin (BTC) has shown remarkable resilience in the face of what on-chain data is calling a “black swan” event. This event has drawn comparisons to the significant crash that occurred in March 2020 during the early days of the COVID-19 pandemic.
On-chain analytics platform CryptoQuant recently highlighted a substantial increase in loss-making unspent transaction outputs (UTXOs). UTXOs represent the amount of Bitcoin remaining after a transaction is conducted. The “UTXOs in Loss” metric monitors situations where a large number of these UTXOs are now worth less than their original acquisition price.
Comparing the Current Situation to March 2020
What makes this situation noteworthy is that more UTXOs are currently in a loss compared to their original purchase price than at any time since March 2020. In March 2020, Bitcoin experienced a dramatic 60% drop, leading to its lowest levels since March 2019—a level that has not been revisited since.
CryptoQuant contributor Woominkyu pointed out this parallel and raised the possibility that, much like March 2020, Bitcoin may be encountering or recovering from a sudden and unexpected selling event.
He noted:
“Given that the current level of the ‘UTXOs in loss’ indicator mirrors that of the Black Swan event between March and April 2020 (due to the Coronavirus), those anticipating another Black Swan event might want to consider whether we are already in the midst of the event they are waiting for.”
Analyzing Market Sentiment through UTXOs
In terms of percentages, approximately 38% of UTXOs were in a loss position at the end of August, a level last witnessed in April 2020. This data suggests that when a significant number of UTXOs are in a loss, investors may feel more inclined to sell, potentially indicating market anxiety. Conversely, when most UTXOs are profitable, it reflects a more optimistic outlook and stronger holding sentiment among investors.
Bitcoin’s current price movement is characterized by a tight range, with no clear trend emerging. Analysis of the “Realized Price,” which considers the price at which Bitcoin last moved, divided by age group, reveals that short-term holders are at a collective loss when BTC/USD falls below approximately $27,000. However, there is no sign of a complete capitulation event on-chain as of now.
Despite facing what is being compared to a “black swan” event, Bitcoin has demonstrated resilience in the face of market volatility. On-chain data provides valuable insights into market sentiment, which can be a crucial factor for traders and investors. However, it’s important to remember that all investment decisions carry risks, and conducting thorough research is essential before making any financial choices.