Bitcoin traded at $38,385 Monday, May 2, despite the bearish pressure experienced over the past few months. The price of the flagship cryptocurrency, which was near $70K at its peak last November, has fallen 44% since then.
For the lowest monthly price, the BTC/USD pairing reached $37 614 last week.
The 70% of Bitcoin supply that is profitable may drop significantly, and a large number of Bitcoiners could see unrealized losses. This is the view from Glassnode’s on-chain analytics report analytics platform Glassnode publishedMonday
The edge of inprofitability
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 despite the fact that markets are still roiled by worries about inflation, higher rates of interest and geopolitical uncertainties.
The result of a steep downside for equities could thus likely cascade into the crypto market and see a large group of BTC holders edge towards “the abyss of holding unprofitable positions,” Glassnode said in the newsletter.
According to on-chain data the cost basis for short-term holders is $46,910. This means that the average amount of coin held by short-term holders currently amounts to -17.9% unrealized loss. The Market Value Realized Valu (MVRV) metric used for STHs also points to severe pain. With the oscillator at -0.75 standard errors, the oscillator is not within the range of the mean.
“With prices trading at $38.5k at the time of writing, the market would need to fall to $33.6k in order to plunge an additional 1.9M BTC into an unrealized loss (10% of supply),” the Glassnode team wrote.
Chart showing that 10% of BTC supply may be at risk. Glassnode
Between 2018-2019 & March 2020, profitability dropped to between 45% – 57%. This means that short-term investors could be in for the worst. Unrealized loss of 40% or more wallets could increase the likelihood of a capitulation, which would lead to panic selling and panic selling in the market.
