When the market is rapidly declining, investors usually transfer their holdings to exchanges to sell. Some still have profits, reflecting a risk-averse mentality; while those selling at a loss reflect typical capitulation behavior - without capitulation, there is no bottom. Therefore, tracking the degree of capitulation during each round of declines will help us assess the current market sentiment.
"Realized loss amount transferred to exchanges" is one of the important quantitative indicators to measure market capitulation. I mainly refer to data from the three leading exchanges: Binance, OKX, and Coinbase. Due to their better liquidity, they can accommodate large amounts of funds coming in and out, thus reflecting changes in market sentiment more accurately.
Since February of this year, BTC has experienced three significant panic declines, from 2/25-2/28, 3/10-3/13, and 4/7-4/10. Below are the panic selling data I compiled for the days before and after these declines:
Chart 1 shows data from OKX. We can see that during the first decline from 2/25-2/28, the level of panic was the most severe, with total losses of $38.85 million. Then, from 3/10-3/13 during the second decline, the realized losses began to diminish, totaling $19.67 million. Although the second decline had a deeper drop, most of the panic had been released during the first decline, and the momentum was gradually weakening.
During the third decline from 4/7-4/10, the realized loss was $22.24 million; the losses from all three declines in OKX were relatively small, suggesting that the primary group was composed of small to medium-sized investors. Since the actual loss amounts in the last two rounds did not change much, this indicates that the emotions of this group are gradually stabilizing. Although the willingness to cut losses is strong, it does not lead to a panic sell-off.
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(Chart 2)
Chart 2 shows data from Binance. As the world's largest exchange with the best trading depth, it is also the first choice for many large funds. From the data, during the first decline, the realized losses transferred to Binance were substantial, totaling $139 million; the losses from the second decline were $43.92 million; and from the third decline, the losses were $58.90 million. Similarly, the losses from the second decline were significantly less than the first, and the changes in loss amounts in the last two rounds were relatively small.
Therefore, we can further validate the aforementioned points: the first decline had the strongest momentum and the most severe capitulation, simultaneously releasing most of the panic in the market; while the panic caused by the third decline was between the first two, reflecting that current market sentiment remains fragile and sensitive, with slight fluctuations causing psychological shifts among investors.
Chart 3 shows data from Coinbase. Although the spot volume on Coinbase is certainly not as large as Binance, we can see that the realized losses transferred to Coinbase during the three declines far exceed the total of the other two exchanges.
In particular, the losses from the wave between 2/25-2/28 reached an exaggerated $553 million, which is likely due to some institutions (or whales) cutting losses and exiting. The losses from the second decline were $257 million, and $166 million from the third, showing a decreasing trend.
This indicates two points: 1. The investors most panicking in this round of correction are American investors, a reason that everyone should be aware of. 2. The losses from the last two declines have significantly decreased, indicating that the 'big players' have finished selling, and the selling pressure is gradually weakening.
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Summary:
1. The data from the last two segments for Binance and OKX shows a slight rebound, but not extreme, indicating that investors are still hesitant, but capitulation did not lead to a panic sell-off.
2. American investors are the main players in this panic sell-off, and there should be whales or institutional funds exiting in terms of scale.
3. The first segment had the strongest panic, representing a deep emotional release period, especially reflected in the institutional side in the U.S.
4. The second segment remains relatively pessimistic, but belongs to the mid-to-late stage of panic release, with reduced selling momentum.
5. In the third segment, the market seems to be less panicked about the decline than before, with short-term sentiment having partially dulled.
If there are no more severe negative events in the short term, and the capitulation selling pressure decreases, BTC may enter a sideways/oscillating bottoming phase to attempt a rebound.
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My sharing is only for learning and communication purposes and does not constitute investment advice.
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