Is a Bear Market on the Horizon? High Percentage of Bitcoin, ETH, and SOL Held at a Loss

Recent findings from Glassnode reveal that Bitcoin, Ether, and Solana are experiencing record high percentages of their supply held at a loss. However, a detailed analysis of the locked supply, institutional holdings, and staking structures indicates that the actual liquid supply under pressure is much lower than the implied percentages—especially concerning Ether and Solana.

Key Takeaways:

Over 40% of Ether (ETH) and more than 75% of Solana (SOL) held at a loss is not liquid, as they are locked in staking, ETFs, or strategic reserves.
Although a significant share of Bitcoin (BTC) is marked as being at a loss, institutional holdings and lost BTC supply dramatically decrease its true liquid supply.

High percentage of Bitcoin, ETH, SOL held at a loss: Is it a bear market sign?

Understanding the Loss Positions and Liquid Supply

Currently, 35% of Bitcoin’s supply is held at a loss, a level reminiscent of when BTC was trading around $27,000. However, despite the high percentage, Bitcoin’s effective liquid supply is much lower than these figures suggest. Here are some important stats:

BTC Circulating Supply: 19,953,406
BTC Held by Public/Private Entities, ETFs, and Countries: 3,725,013 BTC
Total BTC Lost Forever (Estimates): Between 3,000,000 and 3,800,000 BTC, which constitutes approximately 15.0% to 19.0% of the circulating supply.

Cryptocurrencies, Bitcoin Price, Investments, Markets, Cryptocurrency Exchange, Tokens, Price Analysis, Market Analysis, Altcoin Watch, Ether Price, Solana, Ethereum ETF, Bitcoin ETF, ETF Bitcoin's percentage of supply in profit is in a sharp decline. Source: Glassnode

Taking these factors into account, approximately 33% of all Bitcoin is taken out of active circulation. Institutional holdings, particularly from ETF treasuries and corporate reserves, typically do not respond to short-term market fluctuations, functioning under specific mandates for long-term accumulation or index tracking. Furthermore, the lost Bitcoin further lessens the amount that can react to market pressures resulting from perceived losses.

Evaluating Ether's Supply Dynamics

Ether's statistics need a more nuanced understanding. With around 37% of ETH currently at a loss, a significant portion of this supply is either locked or held by institutions:

ETH Circulating Supply: 120,695,601
ETH Staked: 35,681,209 ETH (approximately 29.6%)
ETH in Spot ETFs: 6.26 million ETH (approximately 5.18%)
ETH in Strategic Reserves (SER): 6.36 million ETH (approximately 5.26%)

This means that over 40% of Ethereum is effectively locked in staking, ETFs, or long-term institutional reserves. These types of holdings usually do not respond to short-term market volatility, which indicates that the actual liquid supply of ETH under pressure is significantly smaller when compared to the cited 37%.

Analyzing Solana's Supply Situation

The scenario is even more pronounced with Solana. Although approximately 70% of the circulating supply of SOL is recorded at a loss, the network boasts one of the highest staking ratios among major blockchain networks:

SOL Circulating Supply: 559,262,268
SOL Staked: 411,395,790.5 SOL (around 73.6%)
SOL in ETFs: Roughly 1% of the circulating supply

Cryptocurrencies, Bitcoin Price, Investments, Markets, Cryptocurrency Exchange, Tokens, Price Analysis, Market Analysis, Altcoin Watch, Ether Price, Solana, Ethereum ETF, Bitcoin ETF, ETF Lowest SOL supply in profit in two years. Source: Glassnode

This indicates that more than three-quarters of SOL is locked in validator staking or institutional products, neither of which tend to exhibit significant selling behavior. Notably, when SOL dropped to $121, the percentage held at a loss decreased to 80%, a figure previously observed when the price was close to $20. This illustrates how sensitive this metric is to swift price changes rather than genuine market capitulation.

Interestingly, during market uptrends, the loss percentages for both ETH and SOL typically decline sharply due to their extensive staking locks. Therefore, spikes in these loss metrics may be more indicative of price changes rather than panic selling.

In summary, when examining these three cryptocurrencies, the apparent loss percentages can exaggerate the potential selling pressure. By factoring in locked supply, institutional holdings, and coins that are permanently lost, the true liquid supply at risk is significantly less extensive than initially thought.

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