Indicator Overview

The Cap Loss Ratio is a critical on-chain metric that measures the depth of financial underwater positioning across the Bitcoin network. It quantifies the ratio of true unrealised losses by comparing the network's cost-basis (Realised Cap) against its current market valuation (Market Cap). The formula ensures that the indicator only populates when the network is in a state of aggregate loss, effectively acting as a "Capitulation Thermometer".

The indicator is visualized as a high-fidelity area gradient. As the loss ratio increases, the shading intensifies from a subtle maroon into a deep, vibrant crimson. This visual fanning directly correlates with the severity of network distress. The Bitcoin price is overlaid on a secondary logarithmic axis, providing a stark visual representation of how price collapses trigger immediate spikes in the Cap Loss Ratio, marking the exact moments of maximum market pain.

How To Use

Traders and macro analysts can use the Cap Loss Ratio to identify generational buying opportunities and the final stages of bear market capitulation. When the red area begins to fan out significantly (readings moving toward 0.20 or 0.40), it indicates that a vast majority of the network is holding assets at a loss. Historically, these crimson peaks represent periods of extreme seller exhaustion where the market has overextended to the downside, often preceding major trend reversals.

Monitoring the drain of the red area is equally important; as the gradient recedes toward the zero-line, it suggests the network is returning to profitability and entering a new expansionary phase. Because the ratio defaults to zero when Market Cap exceeds Realised Cap, a blank reading indicates a healthy market where the aggregate network is in profit. This makes the appearance of even small red segments a primary warning signal that the market regime has shifted from profit-taking to loss-absorption.