Bitcoin’s recent pullback has significantly flipped the sentiment across the market, with many predicting a more sustained downward performance toward the $60,000 price mark. Following this sharp decline, more investors are now underwater as BTC’s holders’ profitability strongly declines.
Bitcoin’s Sharp Decline Leaves More Holders Underwater
Given its persistent downward trend over the past weeks, the Bitcoin market dynamics are starting to see one of its most crucial changes in this cycle. One area that has significantly felt the heat of this ongoing bearish action is the holder profitability.
Currently, unrealized losses across the BTC market are experiencing a notable rise, underscoring the heightened pressure that volatility is placing on investors. CryptoQuant’s verified author and market expert, Darkfost, shared that BTC’s price has posted a 12.5% correction over the past week, pushing more investors into unrealized losses.
This increase in unrealized losses implies that many investors who entered the market during the most recent surge are now below their purchase cost as prices decline from recent highs. A sustained rise in this trend could trigger a shift in investors’ sentiment and behavior, leading to increased caution, reduced risk appetite, and a potential capitulation among some weak traders.
According to fresh data, the percentage of supply held in profit has now fallen to about 55%, which is considered a notably low level. However, this level is still slightly above those seen in previous bear market cycles. In the past, bear markets were able to lower this indicator below 50%, indicating that the market was dominated by unrealized losses.
As seen on the chart, this key metric dropped to 53% in February this year. With the rate at which this metric is dropping now, Darkfost believes it will breach the 50% mark sooner than expected. While this remains a bearish development in the short term, especially for those with a long-term vision, this type of period has persistently represented profitable opportunities in the past.
Market Structure Showing A Massive Change Of Hands
Following his examination of this current market structure, Ki Young Ju, the founder of CryptoQuant, has declared this period a distribution phase that feels like a massive change of hands. At the time of the post, BTC’s investors’ average cost basis was around $53,000, which is crucial for the market. This is because bear markets have historically only ended when the price dropped below the realized price.
Given the institutional inflows and Michael Saylor’s Strategy barely selling any BTC, the founder believes that the level would be hard to revisit. However, current price action suggests unusually strong sell pressure that could push BTC to this level.
Since January 2023, MSTR has bought over 711,206 BTC and sold only 32 BTC, removing 711,174 BTC from circulation. Furthermore, ETFs absorbed 509,102 BTC, and MSTR purchased 650,706 BTC while the price was also at $63,000 in March 2024. Combined, that’s over 1,240,808 BTC removed from circulation, but the price is back at the same level.
Moving to exchanges reserves, about 2.7 million BTC are being held in addition to Satoshi’s estimated 1 million BTC holdings. Nearly half of exchange reserves, or more Bitcoin than Satoshi’s stack, have been consumed, and the price has not changed.
Featured image from Solana, chart from Tradingview.com
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