40% of Bitcoin Investors are Now Underwater, New Data Reveals

Source: bitcoin.org

Bitcoin has dropped 50% from its November peak and 40% of Bitcoin holders are now underwater on their investments. This is according to new data from Glassnode.

The percentage could even be higher when you isolate the short-term Bitcoin holders who purchased the cryptocurrency around November 2021 when Bitcoin price was at its all-time high of $69,000.

Source: CoinMarketCap

However, the report notes that although this is a significant drop, it is modest compared to the ultimate lows recorded in the prior Bitcoin bear markets. The bearish trends in Bitcoin prices of 2015, 2018, and March 2020 pushed the Bitcoin price downwards by between 77.2% and 85.5% from the all-time high. This is a bit higher compared to the current 50% drop in Bitcoin price.

Last month, 15.5% of all Bitcoin wallets incurred an unrealized loss. This came after the world’s leading cryptocurrency dropped to the $31,000 level, tracking technology stocks lower. The close correlation between Bitcoin to the Nasqad raises questions about the argument that cryptocurrency works as an inflation hedge.

Glassnode experts have also noted an increase in “urgent transactions” amid the latest sell-off, which cost investors higher fees. This means that cryptocurrency investors were willing to pay a premium so as to expedite transaction times. In total, all on-chain fees paid hit 3.07 Bitcoin over the last week, the largest recorded in its dataset. There was also a “burst of 42.8k transactions,” the highest influx of transactions since mid-October 2021.

The report read, “The dominance of on-chain transaction fees associated with exchange deposits also signaled urgency.” It also supported the case that Bitcoin investors are looking to sell, de-risk, or add collateral to their margin positions to counter the recent volatility in the cryptocurrency market.

During last week’s sell-off, over $3.15 billion in value moved into or out of cryptocurrency exchanges such as Coinbase, Coinmarketcap, and others. Of this amount, there was a net bias on the inflows, as they accounted for $1.60 billion.  This is the largest amount since Bitcoin value hit its all-time high in November 2021. According to Glassnode, this is the same to the inflow/outflow levels recorded during the 2017 bull market peak.

Coinshares Analysts echoed this, saying in their weekly report that digital asset investment products received inflows totaling to $40 million in the past week. The reason behind this could be that investors are taking advantage of the current cryptocurrency price weaknesses.

“Bitcoin saw inflows totaling $45 million, the primary digital asset where investors expressed more positive sentiment,” CoinShares said.

The data also reports that crypto traders have reduced the accumulation of crypto coins in their cryptocurrency wallets. This applies to both small-scale and large-scale cryptocurrency investors. Crypto wallets holding more than 10,000 Bitcoins were the major distributive force over the past few weeks.

Source: dribbble.com

Although there is more conviction among retail investors, the data shows that cryptocurrency traders holding less than 1 bitcoin are the strongest accumulators. However, the accumulation among these small-scale cryptocurrency holders is weaker compared to where it was in February and March.

Fundstrat Global Advisors has called for a bottom of about $29,000 per coin. The firm is also advising clients to buy one to three months and put protection on long positions.

In the midst of the downward trend, bulls will remain bulls, like Changpeng Zhao, the CEO of the Binance crypto exchange. On May 9, he tweeted, “It might be the first time and painful for you, but it’s not the first time for Bitcoin. It just looks flat now. This (now) will look flat in a few years too.”

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