In today's Glassnode charts we see how the spot market in bitcoin reacted during the LUNA crisis and the very short USDT depeg.
As soon as the sales of bitcoin acting as collateral to UST, the LUNA stablecoin, began, and while the USDT peg was also under pressure (but it is important to say that the peg held), the price of btc fell below $30,000, causing net losses to traders totaling more than $2.5 billion in 2 consecutive days.
This is the largest single capitulation event in bitcoin's history (in June 2021, losses were higher, but spread over more days).
In this graph, the dollar value of the losses has been related to the total market capital. In this way we can compare this event with other events that occurred in previous cycles, where total capital was lower (the market was smaller than now).
As we can see, the pink peak of the LUNA-UST capitulation is comparable in severity to the capitulations that occurred in the large recent market crises of 2021, 2020, and 2018.
It is therefore a pivotal event in the life of this cycle.
Here instead we have the "Realized price," which measures the ratio of the sum of the prices that bitcoins in circulation had when they were purchased to the total market capitalization.
The Realized price provides support for bitcoin's descent, in the sense that when the bitcoin price falls below, an ascent occurs, marking the end of the cycle and the beginning of a new bullish cycle.
As can be seen, the current btc price is still just above the Realized price. Should it pierce it to the downside, we will have to keep in mind the table below....
Source: Glassnode
The table shows all bitcoin's downward cycles from 2011 to covid (2019-2020).
The first column from the left shows the duration of each downward cycle.
The second column, on the other hand, is the one we are interested in, and it shows, for each cycle, how long the btc quote was below the Realized price before rising again.
As can be seen, in the covid decline the quote reacted after just 7 days.
In contrast, in the other cycles the quote stayed below the Realized price for a longer time, between 4 and 10 months.
How long will it stay this time? We will see.
In any case, buying btc or other crypto just as the btc quote is below the Realized price is a good way to have some confidence that you are buying at the lowest possible prices.
To sum up: the LUNA-UST event was very important for the completion of this cycle, having finally provided the trigger that serves to accelerate the end of one cycle and prepare for another.
This cycle too cluttered with institutional investors risked reducing volatility to the point of freezing the market by resetting its physiological cycles that provide us with the best returns.
The LUNA-UST event brought the market back to its proverbial dizzying swings, underscored as always by the media's headlines.
I confess that I felt like I was watching a movie I had seen before: stablecoins in danger of losing their pegs, a great currency turning out to be a sandcastle, media headlines sowing terror in the naive. I felt transported back to the good old days when cryptos generated returns capable of changing people's lives overnight. Unfortunately, LUNA's experience screwed up 40 billions in savings, and to some clueless people, they really changed their lives.
Charts by Glassnode
