Data suggest more than 40% of Bitcoin’s supply in circulation is currently at a loss as the entire financial market continues to capitulate.
Statistics from Onchain data aggregator Glassnode have shown that over 43% of Bitcoin in circulation is at a loss. The percentage equals over 8 million mined BTC currently in the red as the crypto market faces dipping prices.
From the chart, the last time this significant number of Bitcoins were at a loss was in 2020 during the covid-19 capitulation. On 15 April 2020, about 8 million BTC were also in a loss. However, as much as 10 million were in a loss in the preceding days.
Following the market recovery and surge in Bitcoins price in 2020, the number of token supply in a loss fell drastically. By October, the number dropped below 1 million and remained there till January 2021. As Bitcoin rose to $59,000 in March 2021, the number of BTC in loss fluctuated between 3 million and beneath a million.
Subsequently, the number of Bitcoin in loss rose to 6 million following BTC’s crash from April to August 2021. The subsequent recovery took the major digital currency to its all-time high price of $69,000. This caused the number in profit to plummet once again to below the 1 million.
However, since October, Bitcoin’s price has been in a downward spiral reaching its current $30,000 price. Meanwhile, the number of circulating BTC in a loss has risen to 8 million again.
Crypto Markets Continue To Decline
Bitcoin and the cryptocurrency markets plummeted after the contentious algorithmic stablecoin TerraUSD(UST) slipped farther off its dollar peg. Bitcoin, which has slowly been declining since it hit ATH last year, saw its price plunge further the previous week. It currently is trading around the #30,000 price following a further sell-off this week.
YTD Bitcoin price action. Source: Tradingview
The chart above shows the sharp decline Bitcoin has witnessed in May after months ranging between $36,000 and $48,000. Several mitigating factors can be put forward as reasons for its steep slump. The US Federal Reserve recently raised its interest rates by 0.5% to help combat rising inflation. Rising prices have been exacerbated by the Russia- Ukraine war and the lockdown in China. These have dramatically impacted the global supply chain.
Consequently, with Bitcoin dipping, almost all other digital assets have slumped. Ethereum and its rivals, BNB, Solana, Avalanche and Cardano, have plummeted. According to Coinmarketcap, Terra’s luna, a cryptocurrency that underpins UST’s dollar peg, has lost over 90% of its value.
Wall Street Not Exempted From The Carnage
The Stock market has not been spared from the carnage with its increasing correlation to Bitcoin. Several reports indicate that most retail’s favourite stocks have lost almost a third of their value this year.
Despite the loss in value, more sell-off is still expected in the market. Data from the AAII Sentiment Survey supports this sentiment. The metric usually determines the percentage of individual investors who are bullish, bearish, or neutral on the stock market in the short term.
AAII Sentiment survey Source: Ycharts
Historically, a market bottom occurs when the AAII cash and stock allocations reach an equilibrium. However, as seen in the chart, both metrics are still a way off the 50/50 mark. The Cash allocation is 17%, while the stock allocation is 68.42%. This means that retail investors continue to hold onto their stocks and have yet to trade them for fiat.
Consequently, this increases the potential for a significant sell-off in stocks. Investors in both the crypto and stock markets need to be wary and hedge their investments to prevent substantial losses.
Do you think Bitcoin will see further price slumps, which will cause more of its circulating supply to be a loss? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
