Panic Selling in Bitcoin is Shaking the Fundamentals of the Market

In recent times, the fluctuations in the price of Bitcoin (BTC) seem to have triggered panic sales among short-term investors. The price's decline below 95 thousand dollars has created unease in the market. However, on-chain data indicates that weak hands are being swiftly eliminated from the market during this process.

According to analysts at CryptoQuant, the current market situation is at a critical threshold known as capitulation. In the past week, new investors entering the market have experienced an average loss of -3.46%. A broader group of new capital has seen a -7.71% loss over the past month. But the most striking data lies among short-term investors. Those who have purchased Bitcoin in the last six months are currently facing an average loss of -12.79%. This situation coincides with historical peaks of panic sales during past cycles.

The CryptoQuant analyst emphasizes that when short-term investors reach this level of realized losses, historically, panic selling periods have maximized. These investors, whose profits have evaporated and have quickly transitioned to losses, tend to sell out of fear that their losses will grow even larger. This creates a vicious cycle that deepens the decline. The emotional explanation of the process can be summarized as urgency, regret, and fear.

According to the CryptoQuant analyst, these behaviors lead to the market being purged of weak hands. The fact that the average realized loss of short-term investors is approaching -13% is a significant indicator that the panic phase of the market is nearing its end. This situation typically indicates a cleaning period where assets are transferred to long-term believers at lower prices. Therefore, despite the current downturn being stressful, the data suggests that it could be an inevitable reset that strengthens the fundamentals of the market.

The saturation of panic sales may allow Bitcoin to recover on a more stable ground. In this context, there are critical points that investors need to monitor.