Bitcoin capitulation metric flashes forced selling signal

The Bitcoin capitulation metric spiked again, returning to levels not seen since the October 10 deleveraging. This time, forced selling and closing of positions, as well as holder capitulation, extended the general BTC slide. 

Bitcoin capitulation is underway, based on the forced selling metric by Glassnode. After most wallets showed signs of holding during the previous market slides, the recent rapid unwinding of BTC led to forced selling. Historically, the capitulation metric has correlated with market bottoms and reversals. However, the October 11 crash went without a reversal, and the current crash arrived with signals of more selling pressure.

BTC dipped below $70,000 for the first time since Q3 2024, erasing most of the euphoric gains from the last bull rally. Bitcoin recovered to $70,171.86, but remains pressured by extremely fearful sentiment. 

Bitcoin capitulation is the second-biggest event in this market cycle

Glassnode’s metrics revealed the recent market sell-off is the second-biggest in the last two years. The shift in selling comes after the market never recovered since the October 10 crash.

From October onward, BTC also never returned to the previous levels of open interest, as derivative traders feared liquidations. 

Over time, the sentiment also affected spot traders. The capitulation event follows weeks of relatively stable holding from almost all cohorts. However, the loss of several support levels caused increasing panic and a rush to avoid a bigger drawdown. 

Bitcoin is now 122 days away from its most recent all-time peak above $126,000, and has lost over 42% since its peak. Even at this stage, BTC is expected to drop more, resembling previous market cycles. 

Bitcoin whales are shedding coins

Whales were in distribution in the past day, selling 14,095 BTC. This time, shark wallets absorbed 181 BTC to their wallets. 

In the past month, all wallet cohorts sold BTC. Whales shed 43,779 BTC, offsetting any buying from Strategy and other DATs. Shark wallets sold 83,771 BTC in January, and 19,194 BTC in the past week alone. 

In the past day, over 30,000 small retail wallets with under 1 BTC sold all their holdings. Surprisingly, those small retail wallets have been buying in the past month, but capitulated as Bitcoin continued to dip. 

Shark wallets with 100-1,000 BTC remain the most numerous holders, which have been accumulating while others have sold. While shark wallets did not capitulate dramatically, they have also distributed some of their holdings in the past few weeks. 

Accumulation peaked in October, and has shifted downward since. While the whales are not in mass distribution mode, short-term selling accelerated and added to the overall capitulation event. 

The current selling is seen as only the beginning of the capitulation, with ongoing potential for more liquidations and selling. Some analysts are preparing for a much lower range and more capitulation events, as crypto sentiment remains low. In the short term, a local bottom is expected in the $50,000 range, with the worst scenarios seeing a pullback to $30,000.