The capitulation metric represents a quantitative reading of the extreme emotional and financial behavior of investors during periods of sharp market decline. Its rationale is based on the idea that major reversal points, local or global bottoms, occur when sellers are completely exhausted, that is, when the weakest participants succumb to fear and sell their assets at a significant loss.

The metric measures the volume of sales made at a loss and applies a quadratic weighting to the difference between the selling price and the base cost of each Bitcoin unit. Therefore, larger losses have a disproportionately high weight, reflecting the much more intense psychological and financial impact they cause compared to small variations. To eliminate noise and capture only consistent trends, the metric is smoothed by a seven-day exponential moving average. Peaks in the red line represent moments of intense capitulation, periods when despair dominates the market and selling pressure reaches its maximum point.

Historically, these peaks precede reversals, marking the transfer of Bitcoin from weak hands to strong hands, which then accumulate after widespread panic. Thus, the Capitulation Metric acts as a true thermometer of collective fear: when it reaches extreme levels, it signals that the pain of sellers may have reached its limit and that the risk of further decline becomes marginal compared to the potential for recovery.

In parallel, the behavior of so-called "smart money" reinforces this interpretation; 99.5% of investors in Bitcoin spot ETFs maintained their positions even after a correction of approximately 20%.