US President Donald Trump’s announcement of tariffs on October 10 sent shockwaves through the cryptocurrency market, causing Bitcoin (BTC) prices to plummet to around $102,000 for the first time since August. The recent crash, with approximately $800 billion in market value losses and $19.2 billion in position eliminations, holds the record as one of the largest liquidations the market has ever experienced.
However, as the market appears to have found some stability around the $111,000 price range, recent on-chain data has surfaced that paints a pessimistic picture regarding the short-term future of the asset.
Analysts say market reset is not yet complete
In a QuickTake post on the CryptoQuant platform, a crypto education organization called XWIN Research Japan explained why they believe the bottom is not yet in sight for the Bitcoin market.
XWIN Research began with an interesting comparison to the previous year, when BTC experienced a psychological reset. According to these market experts, the difference between Bitcoin’s past resets and this market crash can be seen by studying Bitcoin’s Net Unrealized Gain/Loss (NUPL) indicator.
For context, the Bitcoin NUPL indicator tracks the overall profitability of BTC holders. This is done by calculating the difference between unrealized gains and losses. In March 2020, when Bitcoin hit a significant low, the NUPL level was below zero. The same will be observed in November 2022.
It is clear that investors were holding BTC at a net loss during these periods. Interestingly, these periods of market capitulation signaled the beginning of a strong bullish cycle that followed months of despair. What is notable about this crash is that Bitcoin’s NUPL remains close to 0.5, indicating that a significant number of Bitcoin holders are still profiting.
BTC’s calm could indicate an impending storm
To uncover the underlying mechanisms behind Bitcoin’s slowdown in momentum, XWIN Research used the results of the Bitcoin Long Liquidation Index, which measures the total value of leveraged long positions that are forced to close due to wipeouts.
As expected, overly leveraged long positions were wiped out in the last selloff, but that’s not all that happened. According to the Cryptocurrency Research Institute, open interest decreased along with the BTC price, contributing to the normalization of derivatives indicators.
In the 2018-2019 and 2022 market crashes, the initial crash led to deleveraging, but the actual market bottom came several months after the market was deleveraged, during a time when panic and losses prevailed. Based on this historical data, the current settings seem to suggest that the market is in a pre-collapse stage and its stability is too fragile to trust.
As things stand, investor sentiment remains intact. However, if the market gets more scared and the crypto NUPL drops to near-zero levels, a new sustainable bull market could begin.
At the time of writing, Bitcoin’s value is around $111,110, which does not reflect significant 24-hour growth.
Featured image from Pexels, chart from Tradingview.com
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