46% of Bitcoin’s Supply is Currently at a Loss: Will BTC's Downturn Persist?

As Bitcoin [BTC] has fallen from its peak of $126,000, it has been trading within a downward trend, with sellers seizing every opportunity to cash in on any gains. Currently, Bitcoin is priced at $66,689, reflecting a 20% decline over the past month and a 47% drop from its all-time high. This extended bearish trend presents considerable challenges for investors and market participants alike.

Key Takeaways

46% of Bitcoin's circulating supply—roughly 9.09 million bitcoins—are currently at a loss.
Most Bitcoin holders have experienced unrealized losses, with short-term holder losses around $113.9 billion and long-term holder losses about $140 billion.
Institutional investors like Strategy [MSTR] are also facing significant losses despite attempts to accumulate during the downturn.
Market conditions, such as rising losses and negative momentum indicators, suggest that BTC may continue to decline further.

46% of Bitcoin's supply is now underwater: Will BTC's losses keep mounting?

Current State of Bitcoin Losses

According to Bitcoin’s Realized Price UTXO Age Bands, most holders have kept their BTC for over a month at a loss. The realized price for those holding Bitcoin for 1 month is approximately $69,000, while the cohort holding from 1 to 3 months stands at around $90,000. Since Bitcoin's current value is far below these levels, many holders find themselves in the red.

Bitcoin realized price Source: CryptoQuant

As a result, the number of bitcoins trading at a loss has significantly increased. Research by Maartun indicates that about 9.09 million bitcoins, nearly 46% of the circulating supply, are currently experiencing losses. These losses affect both short-term and long-term holders, with short-term holders reporting unrealized losses of around $113.9 billion, while long-term holders face roughly $140 billion in unrealized losses. This ongoing rise in losses signifies a persistent bearish trend in the market.

Bitcoin unrealized loss Source: Checkonchain

Typically, a higher rate of losses could create a situation where sell-pressure increases if holders panic and choose to capitulate due to fear of further declines. Notably, on March 2nd, the realized loss spiked to $705 million, as per data from Checkonchain.

Institutional Strategies and Mounting Losses

As losses continue to accumulate across the market, companies like Strategy [MSTR] and other institutional players are also operating underwater. Despite MSTR's strategy to accumulate more Bitcoin during this bear market—growing its holdings to 717,724 BTC—the decentralized cost averaging (DCA) strategy has not proven effective.

Strategy holdings profit and loss Source: CryptoQuant

With an average cost basis around $76,000, 67% of MSTR's Bitcoin investments are currently showing losses. The overall value of the firm's holdings has plummeted from a peak of $79 billion to about $47 billion. Similarly, the total holdings of Digital Asset Treasuries in Bitcoin have decreased from $125 million to $73 million.

Implications for Bitcoin Moving Forward

Historically, rising losses in the market tend to precede bearish trends. When holders capitulate and decrease their risk exposure, it leads to heightened selling pressure. This selling pressure can accelerate the ongoing decline in Bitcoin's price, as has been observed recently. Current market data highlights a strong downward momentum, indicated by various momentum indicators.

Analyzing the Relative Vigor Index (RVGI), which is now in negative territory, shows increased selling activity coupled with diminished buying interest. Such market dynamics create an environment ripe for further price drops within the cryptocurrency landscape.

Bitcoin RVGI & FGT Source: TradingView

The Future Grand Trend (FGT) indicator further validates these worries, suggesting Bitcoin may dip below the $60,000 mark, forecasting a decline to around $59,213. Additionally, concerning predictions from the FGT imply that Bitcoin could continue to trade within a downward trend, with a bearish target of $45,000 looming.

Conclusion

Given the current market conditions and the widespread losses among Bitcoin holders, it remains to be seen how much longer the cryptocurrency will remain under this pressure. As both retail and institutional investors reevaluate their positions, the potential for further declines in Bitcoin's price increases.