Crypto markets have been flushed out for what many believe is the final time for this bear cycle.

A major capital reset is underway, according to on-chain analytics provider Glassnode. In its “week on-chain” report on Dec. 5, the firm said the FTX collapse caused “one of the largest deleveraging events in digital asset history.”

Markets have been consolidating just above those cycle lows since the FTX meltdown in early November. Additionally, there has been a slight uptick in on-chain activity but nothing substantial enough to catalyze larger price movements just yet.

Glassnode delved into the magnitude of losses realized by all market participants during the massive deleveraging event.

These flushouts are nothing new in crypto markets, and the forced removal of over-leveraged positions is healthier for price discovery in the longer term. High leverage is generally unsustainable for any asset class.

Record Capitulation Event

There were two historical-scale capitulation events this year, in June and in November. The most recent FTX event resulted in a record one-day loss of $4.43 billion, according to Glassnode.

However, the June sell-off, which was spurred by the Terra ecosystem collapse, sustained over $700 million in daily losses for a fortnight.

Glassnode inspected the ratio between realized profit and realized loss, noting that it had hit an all-time low. “This indicates that losses locked in by the market were 14x larger than profit-taking events,” it observed.

Previous ratio lows of similar magnitude occurred at the cycle bottoms of the 2011, 2015, and 2018 bear markets. A macro trend shift followed, and a bull market began the following year in all three scenarios.

The report concluded that the magnitude of losses has diminished in recent weeks following the flushout. It is likely that the consolidation will continue for several months before any notable trend reversal can be measured.

Crypto Market Outlook

In the short-term, crypto markets have retreated 1.1% on the day, dropping total capitalization back to $892 billion. With such low conviction at the moment for the entire crypto space, resistance above current levels is going to be hard to break down.

Bitcoin is hovering just above $17K following a retreat from $17,400 over the past 23 hours. Meanwhile, Ethereum has dropped 2% in a retreat back to $1,266 at the time of writing, according to CoinGecko.

Furthermore, there has been very little movement in either direction for most of the higher-cap altcoins today.