Half of the bitcoin supply in circulation is underwater for the first time since 2022
A silver lining to the statistic may be that it’s a level that has historically aligned with cycle bottoms, and that some now view the asset as cheap.
Bitcoin’s recent tumble means that now half of the supply in circulation is sitting at a loss. Bloomberg, citing K33 Research, reported that this is the first time this has occurred since late 2022.
The millions of bitcoin sitting underwater underscores “the scale of the recent market reset,” Glassnode analysts said.
Bitcoin saw a small bump on Wednesday following the CPI report, trading around $62,000, at the upper end of the tight range it’s been stuck in.
Matt Mena, a senior crypto research strategist at 21shares, told Sherwood News that having 50% of bitcoin holders at a loss is a level that has historically aligned with cycle bottoms.
The $55,000 support level becomes the next crucial area to watch, he said, as bitcoin has repeatedly found long-term support near realized price (around $55,000) during major drawdowns, including the late 2018 crash, the March 2020 Covid crash, and the 2022 FTX collapse. Mena said $100,000 remains the firm’s year-end target.
Zach Pandl, Grayscale’s head of research, offered a silver lining to the recent pullback, telling Sherwood that, in his view, current levels for bitcoin represent an attractive entry point for longer-term investors looking to dollar-cost average into position.
“Is bitcoin cheap yet? The answer — according to the signal from a range of onchain valuation indicators — is yes, but not as much as previous cyclical lows (e.g., post FTX-collapse). Whether we have hit bottom this time depends on the regulatory outlook and on how large leveraged BTC holders perform in the short run,” Pandl wrote in a note.
Pandl told Sherwood, however, that there may be additional short-term downside risk if the CLARITY Act fails to pass the US Senate and/or there is further pressure on digital asset treasury balance sheets.
CryptoQuant Head of Research Julio Moreno also underscored that the realized price, which he puts at $53,600, is a valuation zone where previous bear cycles have found their structure, and remains one of the most important valuation anchors in bitcoin’s on-chain framework.
“Historically, bitcoin has bottomed at or marginally below the realized price in each major bear cycle,” Moreno said in a report, adding, however, that a confirmed bear market bottom or bullish reversal may still take time to develop.
“Another signal pointing to the fact that a bottom could take some time is that realized losses from bitcoin holders have not reached capitulation levels,” Moreno said. “The absence of a capitulation spike suggests the market has not yet exhausted its supply of motivated sellers.”
Looking ahead, some signal that bitcoin could drop below $60,000 once again, a probability HashKey senior researcher Tim Sun called “not low.”
Sun cited continued US-Iran tension, which “continues to suppress any potential market rebound,” and institutional hedging.
“Looking at CME options data, a dense Put Wall has already formed at $47,500. This indicates that institutional investors are aggressively buying downside protection to hedge against potential downside risks,” Sun told Sherwood.
