Bitcoin is trading around $38,385 on Monday, May 2, still struggling against the bearish pressure seen over the past few months. The flagship cryptocurrency, which hit prices near $70,000 last November, is down 44% since its peak.
This past week, the BTC/USD pair touched lows of $37,614 for its lowest price level in a month.
With markets largely negative, the 70% of Bitcoin supply that is profitable could drop significantly and see a large group of Bitcoiners see unrealized losses. That’s the outlook from a Glassnode on-chain analytics report platform released on Monday.
At the edge of unprofitability
According to the report, the danger of a downside remains given Bitcoin’s recent high correlation with the S&P 500 and Nasdaq. This is even as there is continued roiling of markets amid concerns over inflation, higher interest rates and geopolitical uncertainties.
The outcome of a sharp decline in stocks could therefore likely spill over into the crypto market and see a large group of BTC holders heading towards “the abyss of occupying unprofitable positionssaid Glassnode in the newsletter.
Per on-chain data, the cost basis of short-term holders (STHs) is $46,910. This means the average coin currently held by short-term holders is at unrealized loss of -17.9%. The Market Value Realized Value (MVRV) metric for STHs is also pointing to significant pain, with the oscillator off the mean at -0.75 standard deviations.
“With prices trading at $38.5k at the time of writing, the market would need to fall to $33.6k in order to plunge another 1.9m BTC into an unrealized loss (10% of supply)wrote the Glassnode team.
Chart showing that 10% of BTC supply could fall into loss. Source: Glassnode
In 2018-2019 and in March 2020, profitability fell to between 45% and 57%, which means the worst could yet happen for short-term holders. If 40% or more of wallets fall into unrealized loss, it would increase the probability of a capitulation event, with a cascade of panic selling hitting the market.
