An intriguing trend is emerging in the world of Bitcoin as on-chain analytics illustrate a substantial change in the distribution of underwater Bitcoin supply. As the market grapples with volatility, the share of long-term holders has notably increased, signaling a potential shift in investor sentiment.
According to the latest weekly report from an on-chain analytics firm, approximately 23.7% of the total Bitcoin supply is currently being held at a loss. This metric, referred to as the Total Supply in Loss, tracks the amount of Bitcoin that has been purchased at prices higher than its current value.
The methodology for determining this loss is straightforward. The analytics firm meticulously reviews the transaction history for each Bitcoin to find its last trading price. If this price was lower than the current market value, that coin is categorized as underwater. The metric sums up all such coins to present an overall picture of the network’s situation, contrasting with the Total Supply in Profit, which accounts for coins bought at lower prices.
Recent charts indicate that the Total Supply in Loss saw a dramatic increase when Bitcoin’s price plummeted in November. Since that decline, this metric has remained relatively stable, fluctuating between 6 and 7 million BTC, with the current figure standing at 6.7 million BTC. This level marks the highest losses observed on the network in 2023.
As observed, the supply of underwater Bitcoin has stabilized within the 6-7 million BTC range since mid-November. This trend mirrors earlier patterns seen during previous market transitions, where growing frustration among investors often leads to more pronounced bearish conditions and capitulation at lower price points.
This report also highlights the divergence between short-term holders (STHs) and long-term holders (LTHs) of Bitcoin, underscoring the importance of the 155-day holding threshold that distinguishes the two groups. Investors who acquired Bitcoin within this period fall into the STH category, while those who have held for a longer duration are classified as LTHs.
The recent surge in loss supply was predominantly driven by STHs. However, as Bitcoin’s price has continued to hover at lower levels, the dynamics have shifted. LTHs have begun to accumulate a greater share of the loss supply.
As it stands, 13.5% of the underwater Bitcoin supply is held by STHs, with LTHs accounting for 10.2%. This trend suggests that, akin to past cycles, Bitcoin acquired by newer buyers is gradually transitioning into the hands of long-term holders, reinforcing the notion of ‘HODLing’ in challenging market conditions.
Current Market Conditions
As of writing this article, Bitcoin is trading at approximately $85,400, reflecting a decline of more than 5.5% over the past week. The market remains vigilant as investors adjust their strategies in response to ongoing price fluctuations.
