Could Another Bitcoin Plunge Below $80K Impact 23% of BTC Supply?

Key Points

• Bitcoin’s supply in profit has decreased from 99% to 76%, with a significant portion of holders now in unrealized loss.
• Despite a pullback, most Bitcoin holders are still in profit, but sell-offs are outweighing buys across major exchanges.

Bitcoin holders have seen a significant shift, with the percentage of the cryptocurrency’s supply in profit falling from 99% to 76%. This means a substantial number of holders are now in unrealized loss.

Despite this, 76.08% of Bitcoin’s supply remains in profit, the lowest it’s been in six months. This suggests that the majority of Bitcoin holders are still in the green. However, this leaves 23% of the circulating supply, or around 4.56 million BTC, in unrealized loss.

Market Dynamics

As more holders move into unrealized loss, some may choose to sell to limit further losses. This introduces a need for increased sell-side liquidity, for which volume indicators are key.

Trading volume has seen a surge of 178.22% to $43.12 billion, while net deposits on exchanges have risen by 3.96%. This indicates that sell-offs are outweighing buys across major exchanges.

With U.S. investors’ buying pressure remaining low due to economic uncertainty, it’s suggested that retail buyers aren’t stepping up to absorb the selling pressure. This could imply the involvement of third-party players, possibly institutions, in determining the market’s next move.

Risk in Bitcoin Derivative Trade

In the midst of weak spot buying, Bitcoin’s Estimated Leverage Ratio (ELR), which recently fell to a three-month low, has seen a dramatic surge. This suggests that derivatives traders are not de-leveraging, but instead increasing leverage to take on higher-risk positions.

On March 9, Bitcoin experienced a 6.41% drop to $80K, resulting in $195.86 million in liquidated long positions. Institutional “dip-buying” is gaining traction, potentially setting the stage for a short squeeze. This could drive Bitcoin to retest the $85K resistance zone.

Breaking through this resistance, however, remains a challenge. Escalating sell-offs could lead to further liquidations, pushing Bitcoin below $80K again. In conclusion, institutional capital is absorbing sell-side liquidity from traders breaking even after Bitcoin’s 17% weekly decline. However, the risks associated with “dip-buying” remain high.