Bitcoin is one of the fastest-growing asset classes in history.
It traded at fractions of one penny 14 years ago and soared to close to $69,000 in the last year.
This is why it is so amazing that Bitcoin supply is currently losing money. Only 49.4% are profitable when you compare the current Bitcoin price to the last time that coins were moved.
This is the first time that Bitcoin addresses have been in red since the COVID panic of March 2020, with the exception of a few short visits below half-way in September.
There may be a lesson in FOMO somewhere.
It’s amazing how much money was poured into crypto markets during the pandemic. With cryptocurrency always residing in media coverage, Zoom chatrooms, and mainstream consciousness, it is clear that the majority of the network is now underwater.
Zooming out further to Bitcoin’s inception in 2010, shows how the price really ramped up in latter years – as well as the number of addresses in profit plummeting thereafter when the music stopped playing.
This doesn’t really show us anything we don’t know already, but I nonetheless thought it underlined quite how brutal this bear market has been. The 2018 bear market was at its lowest point when profit per address dropped below 40%.
Although March 2020 was an unusually outlier month, it was also when COVID really arrived. However, we were below 45%.
We have some more work to do in this context. But what exactly is this context? Actually, I think the metrics from past crypto winters are mostly irrelevant. Crypto is too advanced to be compared with those days when liquidity was scarce and Bitcoin was restricted to remote corners of the Internet. This was not a common financial asset. I hesitate to draw too many conclusions from these periods.
Second, previous cycles didn’t occur alongside a bear market in all financial assets. Since 2009, Satoshi Nakamoto’s publication of the Bitcoin whitepaper in 2009, the stock market has been able to post unstoppable gains.
Let me be very clear, therefore: crypto has never existed while there has been a wider market bear, or – dare I say it – recession. It is important to compare the current cycle to ensure that you are not making any mistakes. It is not enough to wait for the inevitable bounce back.
This could be exactly what happens. Who knows – but my point is that such blind optimism is misplaced. This is a unique environment for crypto.
We have fallen so far that more addresses are not loss-making.