Data shows more pain for Bitcoin holders

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The overall supply of bitcoin in loss suggests that the market is still bottomless. However, long-term owners are still optimistic.

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Bitcoin: Data signals further pain

It has been nine months since the market peaked. In that time, about $2 trillion in capital has exited the market. This has hit token prices hard.

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However, the question remains: is the market bottom yet?

Analysis of data on the Glassnode chain shows that sentiment is generally positive among long-term holders. However, a comparison of the total provision of losses with previous years shows that the bottom has not yet been reached.

The entire supply of bitcoin in loss

Long-term Bitcoin holders are those who have held BTC for more than 155 days. Historical data shows that the capitalization of long-term Bitcoin holders typically coincides with the bottom of the market cycle.

The chart below shows the total supply of long-term Bitcoin (LTH) holders at a loss over the past 11 years. In 2015, 2019 and 2020, when this metric exceeded five million tokens in loss, BTC price soon returned to the uptrend.

The current supply with losses is approaching this threshold. This suggests that the market is still bottoming out and that there is more pain ahead for Bitcoin holders.

Total Bitcoin Supply Down by LTHs, Source: Glassnode.com

Profit and Loss by Yield Bonds

The Profit and Loss by Yield Bands metric shows the pain currently felt by LTHs (long term holders). This metric shows the spending behavior of different market cohorts, divided into ranges related to the amount of realized gains/losses.

Data are presented as a percentage of market capitalization. For example, a Y value of +0.5 means that the total realized profit was equal to 0.5% multiplied by the total market capitalization at that point in time (X coordinate).

Meanwhile, the profit or loss is calculated in USD by multiplying the value of the coin by the selling price minus the buying price. This calculation is then aggregated for all coins issued and divided across the appropriate yield band.

The chart below shows LTHs deep in the surrender zone. However, the current lower band is around -0.07. That is well below the 2015 low of -0.12 and the 2019 low of -0.14.

Profit and Loss at Yield Bonds, Source: Glassnode.com

Change in the net position of long-term investors

The net change in the location of LTHs relates to the issuance of tokens when LTHs are paid out or the accumulation when new job holders take up positions.

The chart below shows that the net change in position in 2022 varies between distribution and accumulation – to a lesser extent than in previous years. This reflects a high level of uncertainty amid deteriorating macroeconomic conditions.