The volatile crypto market highlights the importance of dependable mechanisms to indicate likely price bottoms as well as market turning points. In this respect, Glassnode has recently unveiled a unique Capitulation Metric in line with the Cost Basis Distribution to provide traders with a data-led tool to navigate Bitcoin ($BTC) and overall market cycles. The platform shared the details of this metric in an exclusive report.
Glassnode Unveils Capitulation Metric, Offering Better Overview of Losses and Investor Sentiment
As per Glassnode, the conventional metrics indicating realized loss deal with losses equally. However, deep drawdowns reportedly influence investors to a significant extent. Based on this, Capitulation Metric is responsible for identifying such a difference by implementing quadratic weighting, emphasizing bigger losses. The respective refined approach delivers a relatively precise representation of the selling pressure and the wider investor sentiment.
A prominent feature of Glassnode’s Capitulation Metric take into account the detection of local bottoms in line with the capitulation signals. In addition to this, the metric also detects where troubled sellers quit the market. Moreover, it also leverages on-chain data to assist in making sagacious trading decisions. Crypto market bottoms often take place during the extreme distressful periods. These times are marked by peaks of forced sellings and capitulation by exhausted investors. The Capitulation Metric tracks these changes in the wider supply distribution by utilizing CBD.
Strengthening Relatively Informed Decisions in Extreme Market Conditions
According to Glassnode, the Capitulation Metric takes into account 3 main features. One is “Weighted Sell Volumes,” which implements a quadratic function to examine prices for the identification of severe losses. Additionally, another prominent feature is “Smoothing for Clarity.” it includes a 7-day EMA to filter out temporary noise to get robust trend analysis. Moreover, the 3rd well-known feature is “Non-Linear Economic Pain.” It weighs losses in line with psychological influence instead of nominal value. Overall, Capitulation Metric offers wider insights into likely buying opportunities, letting investors make relatively informed decisions in extreme conditions.
