Bitcoin UTXOs echoing March 2020 'black swan' crash — New research

Bitcoin's Recovery and Loss-Making UTXOs

New data suggests that Bitcoin is recovering from a major event similar to the "black swan" crash that occurred in March 2020, during the COVID-19 outbreak. On-chain analytics platform CryptoQuant revealed a significant increase in loss-making unspent transaction outputs (UTXOs) in a recent post.

UTXOs in Loss Reflects the Market Activity

While Bitcoin's current price weakness raises concerns among market participants, on-chain data reveals an intriguing picture of the activity happening "under the hood." UTXOs represent the remaining BTC after a transaction occurs on the blockchain. CryptoQuant's UTXOs in Loss metric tracks instances when a large number of these UTXOs are worth less than their original acquisition price. Presently, there are more UTXOs in loss compared to any time since March 2020.

During the March 2020 crash, BTC/USD plummeted by 60%, reaching its lowest levels since March 2019, which were not revisited. Looking at the current data from UTXOs in Loss, CryptoQuant contributor Woominkyu suggests that Bitcoin may be experiencing or already bouncing back from another unexpected selling event similar to the Black Swan event in March 2020.

Woominkyu stated, "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."

Market Sentiment and Underwater Bitcoin Speculators

According to CryptoQuant data, as of the end of August, 38% of UTXOs were in loss, a percentage last observed in April 2020. Woominkyu added that when many UTXOs are in loss, it suggests market anxiety, potentially leading investors to sell. Conversely, when most UTXOs are profitable, it indicates an optimistic outlook and stronger holding sentiment among investors.

In the midst of a lack of overall BTC price trend, Bitcoin remains confined to a tight range. Cost basis data shows that the current spot price is trapped between the acquisition prices of various investor cohorts. Short-term holders experience an aggregate loss when BTC/USD is below approximately $27,000. However, an on-chain full capitulation event has yet to be recorded.

Please note that this article does not provide investment advice or recommendations. Any investment or trading decision carries risks, and readers should conduct their own research before making a decision.