Bitcoin’s Fragile Stability: A Pre-Capitulation Warning

The cryptocurrency market experienced a significant crash on October 10 following a US tariff announcement, sending Bitcoin (BTC) prices to $102,000, resulting in an $800 billion market value loss and $19.2 billion in liquidations. Despite a recent rebound to around $111,000, analyst XWIN Research Japan suggests this stability is precarious and the market has not yet reached its “real bottom.”

XWIN Research highlights the Bitcoin Net Unrealized Profit/Loss (NUPL) metric, which measures the overall profitability of BTC holders. Historically, major market bottoms in March 2020 and November 2022 saw NUPL levels drop below zero, indicating widespread investor losses and capitulation. These periods, marked by hopelessness, subsequently initiated strong bull cycles. However, the current NUPL stands near 0.5, implying a substantial portion of holders remain in profit, a key difference from previous capitulation phases. This suggests the market has not yet undergone the necessary psychological reset seen in past cycles.

Further analysis using the Bitcoin Long Liquidations metric, which tracks forcibly closed leveraged long positions, reveals that while the initial dump cleared some leverage and normalized derivatives like Open Interest, this alone doesn't signify a bottom. Drawing parallels to the 2018-2019 and 2022 crashes, real market bottoms typically occurred months after initial leverage wipeouts, during prolonged periods of panic and loss. The current market's calm is therefore seen as a pre-capitulation phase, with its stability being too fragile to trust.

The analyst concludes that investor sentiment remains relatively intact. For a new and sustainable rally to begin, the market would likely need to become more fearful, pushing the cryptocurrency's NUPL closer to zero. This significant drop in profitability would signify true capitulation, historically preceding robust recovery phases, indicating that the current price stability around $111,110 is merely a pause before a potential further downturn.

(Source: https://bitcoinist.com/bitcoin-tariff-crash-not-be-the-real-bottom-analyst/)