Bitcoin's current market conditions bear a striking resemblance to the sideways price action observed in early 2022, according to insights from on-chain analytics firm Glassnode. The firm's latest weekly report highlights a rising supply of Bitcoin held at a loss and shrinking profit margins for long-term holders, suggesting a period of market consolidation and uncertainty.
Supply Quantiles and Investor Profitability
Glassnode's analysis utilizes its Supply Quantiles Cost Basis Model, a tool that identifies price levels corresponding to specific degrees of investor profitability. This model tracks three key quantiles: 0.75, 0.85, and 0.95. A 0.75 quantile indicates that 75 percent of the Bitcoin supply is held at a profit, while the 0.85 and 0.95 quantiles represent 85 percent and 95 percent profitability, respectively.
The report indicates that Bitcoin has recently dipped below all three of these quantile levels. This signifies that more than 25 percent of the cryptocurrency's circulating supply is currently underwater, meaning it is held at a loss. Glassnode suggests this scenario creates a delicate balance within the market, characterized by the risk of capitulation from recent buyers and the potential for seller exhaustion to form a market bottom. The firm noted that Bitcoin also experienced a similar decline below the 0.75 quantile during the sideways market conditions of early 2022.
Total Supply in Loss Surges
Further supporting the comparison to the early 2022 market, the Total Supply in Loss metric has shown a significant increase. This metric quantifies the amount of Bitcoin (BTC) circulating supply that is held at a net unrealized loss. According to Glassnode data, the 7-day moving average of Bitcoin's Total Supply in Loss reached 7.1 million Bitcoin last week, marking the highest level observed since September 2023.
Glassnode reported that the current range of supply in loss, fluctuating between 5 million and 7 million Bitcoin, closely mirrors the levels seen during the early 2022 sideways market period.
Long-Term Holder Profitability Tightens
The Bitcoin long-term holder Spent Output Profit Ratio (SOPR) also reflects market conditions similar to the first quarter of 2022. This metric assesses whether Bitcoin investors who have held their coins for more than 155 days are selling at a profit or a loss.
While the Bitcoin long-term holder SOPR has experienced a sharp decline in recent weeks, it remains above the crucial level of 1. This indicates that long-term holders are still selling their Bitcoin at a net profit. However, Glassnode reported that the current value of 1.43 signifies a notable reduction in the profit margins for this segment of investors, suggesting a tightening of profitability.
Bitcoin experienced a slight decline over the past 24 hours, according to market data.