Analysis of Small Investor Behavior
Cryptocurrency analysis firm Santiment has argued that the behavior of retail investors in Bitcoin, Ethereum, and XRP suggests a potential market recovery following recent sharp declines. According to Santiment's data, there has been a significant wave of panic selling originating from small investor wallets in the past few days.
Santiment defines small investors as those holding wallets with low total balances. Their analysis indicates the following selling patterns:
- •Bitcoin wallets containing less than 0.01 BTC have sold 0.36% of their assets over the last five days.
- •Ethereum wallets holding under 0.1 ETH have sold 0.90% of their assets in the past month.
- •XRP wallets with balances below 100 XRP have decreased their holdings by 1.38% since the beginning of November.
Historical Precedent and Market Implications
Santiment posits that historically, market prices have tended to move in the opposite direction of small wallet activity. Therefore, the firm suggests that the continued panic selling by retail investors could serve as a positive indicator for a market recovery.
On-Chain Data and Capitulation Phase
On-chain analytics firm Glassnode has also drawn attention to the prevailing selling pressure in the market. Their data reveals a dramatic increase in realized losses by short-term investors, averaging $427 million per day over a 7-day moving average. This figure represents the highest level of losses recorded since November 2022, a period often referred to as the "Great Depression" in the crypto market.
Glassnode's analysis suggests that panic selling has reached a peak, surpassing the losses observed during the previous two major market lows within the current cycle. This indicates that the market may currently be in a "capitulation phase," a point where extreme selling pressure often precedes a potential rebound.