Bitcoin Decline Erases Over 70% of Active Investment Value as Market Sentiment Deteriorates

The recent downturn in Bitcoin, which has dipped to nearly $80,000, signifies a major shift in market conditions for the leading cryptocurrency as most of its active capital enters the loss zone.

Key Takeaways

Over 70% of Bitcoin investments are now at a loss, with a critical cost basis set above $86,500.
Short-term holders are facing significant financial strain as their profits have dwindled dramatically.
Bitcoin’s market sentiment has plummeted to a two-year low, with retail traders panic-selling.
Historical trends suggest extreme bearish sentiment may signal a potential market recovery.

Following a near 35% drop from its October peak of approximately $126,000, Bitcoin has hit a seven-month low, leading to significant unrealized losses among investors.

Majority of Bitcoin Investments Underwater

Data from the blockchain analytics firm Checkonchain reveals that the recent price decline has left over 70% of Bitcoin investments in a losing position. According to analyst James Check, approximately 71.2% of Bitcoin's total market cap has a cost basis of at least $86,500. This information illustrates the price at which each Bitcoin last moved on chains.

This data can be interpreted as the average entry price for investors currently holding Bitcoin. As Bitcoin recently slipped below this critical threshold, many buyers from the late 2024 and early 2025 price rallies now find themselves facing substantial losses, effectively trapping them in unprofitable positions. This concentration of investment at the peak values signals high stress levels among short-term holders, leading their net unrealized profits and losses to hit all-time lows for this cycle.

Market Sentiment Hits a Two-Year Low

The broader market challenge is further demonstrated by data from Glassnode. Their Relative Unrealized Loss metric, which gauges the dollar value of coins worth less than their purchase price relative to the market's total capitalization, has surged to 8.5%. Normally, this indicator hovers below 5% during a typical bull market.

The sharp increase in Relative Unrealized Loss indicates a severe market reset rather than a mere price correction. Despite a modest recovery to about $84,543 at the time of writing, significant psychological damage has occurred in the retail sector. Analytics from Santiment, a blockchain analytics platform, show that social media sentiment is at its lowest since December 2023. This analysis of discussions across platforms like X, Reddit, and Telegram indicates that retail investors are capitulating and engaging in panic selling at levels not observed in two years.

Historically, periods of extreme bearish sentiment can sometimes serve as a contrarian indicator, hinting that the market might be shedding weaker positions in preparation for a potential rebound.

In conclusion, the ongoing struggles indicated by the substantial losses and collapsing market sentiment could lead to significant shifts in Bitcoin's trading dynamics in the near future.