Bitcoin’s Bear Market Long-Term Holders Capitulation Started: Reason for Optimism?

Bitcoin is headed for the weekly close, and all eyes are on its price. The past nine weekly candles have been negative, and the question is if it will break this trend today or put in the 10th red weekly candle.

Meanwhile, according to an analyst from CryptoQuant, the capitulation of long-term holders throughout this bear market has begun, and this may be a sign of optimism.

Long-Term Holders Capitulation: What Does it Mean

First, it’s important to explain that capitulation in investing or trading – just as in its traditional sense – means that someone has lost hope that their position will reach its goals and is finally ready to let go of it.

In the current context, the capitulation of long-term holders means that people or entities who held BTC for a prolonged period are departing from their trade, albeit in a profit or loss.

This is important because markets tend to bottom out when there are massive losses inflicted on participants.

Markets usually tend to put in a bottom when massive losses are inflicted on the market participants – an event known as “capitulation.” In bear markets, long-term holders’ capitulation usually marks a multi-year bottom.

It’s also very important to note that this is may not be a one-off event, and it could take weeks or months for long-term holders to capitulate definitively.

For example – back in 2014/15 and in 2018, long-term holders of BTC took months to capitulate, whereas, during the vicious COVID crash of 2020, it only took a few days, as perfectly evidenced from the below chart:

Good Sign for Bitcoin’s Price?

Whether or not this is a good sign for Bitcoin’s price depends on the specific perspective. The fact that the capitulation phase has begun means that there could be more selling in the future. However, it also means that the market is getting closer to the bottom.

Commenting on the matter ad taking into account the above chart, the analyst said:

The long-term holders’ SOPR is a metric which measures the amount of profits/losses which are realized by this (LTH) cohort. It is evident that during previous bear markets, a lengthy period of long-term holders’ capitulation occured as these participants were exiting the market at a loss and selling their unervalued coins to new participants or “smart money,” which are happy to buy an undervalued asset in huge chunks and hold for extraordinary returns in the future bull market.

In addition, the analyst concluded that long-term holders are selling at a loss, indicating “that the smart money accumulation phase has begun.” This could, supposedly, “present a great opportunity for long-term investing in the market.”