30 Percent of Bitcoin Supply Held at a Loss: Here's What It Means for BTC HODLers

Bitcoin has dropped more than one-third of its value since hitting a record high in November 2021, and BTC holders who bought near the peak of the market are now faced with unrealised losses and if market factors are anything to go by, volatility is expected to continue. According to on-chain data provider, Glassnode, BTC 5.7 million, or 30 percent of the coins in circulation, are currently in the red, which suggests that they're of no worth, less than what their owner paid for them.

Glassnode says in a blog post that the current level is historically and psychologically an important, as it has been noticed since May 2020, that every time the percentage of Bitcoin supply "in profit" has dipped close to or below the 70 percent barrier, the market has been able to mark a turnaround.

"The reaction from this level will likely provide insight into the medium-term direction of the Bitcoin market," Glassnode writes in the blog. "Further weakness may motivate these underwater sellers to finally capitulate, whereas a strong bullish impulse may offer much needed psychological relief, and put more coins back into an unrealised profit."

As things stand, there are both bullish and bearish indicators which makes it hard to tell which way the crypto market could swing in coming weeks. But open interest in Bitcoin derivatives markets suggest that a particular subset of investors are ready to get incur losses. Open interest in this case refers to the amount of BTC people have bet on Bitcoin hitting a specific price target —could be lower or higher — at any point in the future. According to Glassnode's video report, the derivatives market has "set the stage for some kind of leverage flush."

According to on-chain stats provided by the market intelligence firm, the open interest in BTC futures is at about 250,000 Bitcoins (roughly worth around Rs. 77,911 crore) and that figure is what it a "historically elevated level."

"There is evidence that the market is reaching some form of price and momentum equilibrium," Glassnode notes and despite the bullish indicators, "Bitcoin bears certainly have the upper hand."

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