Bitcoin: The Impact of FTX and Its Impact on Profitability, Blockspace Demand, and More

  • Realized Bitcoin losses hit record highs when FTX collapsed.
  • The new demand for block space is entering the market again.
  • Small transactions dominate the market.

In the wake of the unexpected crash of FTX, Bitcoin [BTC] It traded for $15,000, trading at a two-year low.

As Coin King bounced from a low of $16,065 to a high of $17,197 to start recovering, the on-chain platform Glassnode analyzed evaluation Effects of the FTX implosion on market participants, miners, and BTC network activity.

Read bitcoins [BTC] Price forecast 2023-2024

How big are the losses?

Glassnode first considered the amount of losses as the different groups of owners that make up the BTC market. An evaluation of BTC’s realized profit and loss metrics revealed that the FTX disaster pushed BTC to record a one-day loss of $4.435 billion, which is a record.

With BTC price regaining the $17,000 mark, a reassessment of the metrics on the weekly moving average shows that losses are beginning to narrow, Glassnode found.

Source: Glassnode

To understand the severity of the losses incurred by market participants, Glassnode evaluated the realized capitalization metric. This metric shows the net sum of capital inflows and outflows into the network since its inception. It is used to determine the intensity of capital outflows from the network after the market cycle has stopped.

After the FTX fallout, BTC realized capitalization dropped to May 2021 levels, bringing the “glut seen in the 2022 H2 rally to ATH” close to the point of a full rebound. This, according to Glassnode, indicates “an almost complete disposal of this excess liquidity.”

Source: Glassnode

Glassnode noted that,

“The realized loss suffered by Bitcoin investors over the past six months was historic in magnitude. Profitability pressures began to ease after the event, but it completely drained all the excess liquidity that had been attracted over the past 18 months. This indicates a complete expulsion of the premium.” speculation in 2021.

The demand for block space is increasing

Historically, long bear markets have been characterized by a decrease in network activity, culminating in small fee earnings for miners on the BTC network.

As the bear market continues, the continued decline in the BTC price usually attracts new demand for the blockspace. As sellers are replaced by buyers, the demand for block space will increase, thus increasing the miners’ fee income.

With BTC recovering from a two-year low, Glassnode found that “monthly BTC mining fees are starting to climb.” However, she added a caveat

“More important is whether this recovery is ephemeral or whether it can be sustained, meaning that a potential change to the system is in the works.

Source: Glassnode

As the market attempts to recover from the FTX crash, Glassnode has found that smaller transactions (up to $100,000) have dominated the market while larger institutional size transfers have waned.

A look at the measure of total BTC transfer volume confirmed this. While the number of transactions is increasing, the volume of transfers is decreasing, and according to Glassnode, this is “likely a reflection of more small transfers.”

Source: Glassnode

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