Bitcoin [BTC] Holders anticipating a bear market bottom should read this

Bitcoin [BTC] Prices have been unusually volatile in recent weeks. This can be viewed in contrast to the broader financial markets (equity, credit, and forex markets), which Glassnode says have been significantly volatile over the same period report.

While there was speculation that BTC investors were attempting to establish a bear market bottom, Glassnode looked at some on-chain metrics to further underscore this point.

Learning from the history books

First, Glassnode considered BTC’s supply percentage of profit. According to them, tracking bearish profit supply has been a useful tool to “identify points of heightened financial stress that have exhausted sellers in previous cycles.”

In previous bear markets, BTC’s profit offering percentage has ranged from 40% to 42% during the bottoming phase. However, in the current bear market, Glassnode found that 50% of BTC’s circulating supply remained as unrealized gain. This indicated, according to the blockchain analysis platform, that

“The profitability of the offer remains high compared to historical analogues. This suggests that a full detoxification of profitability may not have happened yet.”

Source: Glassnode

Additionally, Glassnode factored in BTC’s relatively unrealized earnings metric. Going back in time, the analytics firm discovered that whenever aggregate unrealized gain dwindled to about 30% of BTC’s market cap, the sellers who initially ravaged the market ended up exhausted. In the current market, the decline in price since the all-time high set in November 2021 caused the metric to drop to 0.37.

Glassnode also took a closer look at BTC’s net unrealized gain/loss (NUPL) metric. This determined the difference between the network’s unrealized profit and loss in relation to the market capitalization.

It turns out that since early June, BTC’s NUPL has ranged from 0% to -15% on two separate events lasting a total of 88 days so far. In addition, in previous markets

“NUPL has fallen below -25% in previous cycles and remained negative between 134 days (2018-19) and 301 days (2014-15).”

Glassnode then evaluated BTC’s Adjusted-Net Unrealized Profit/Loss (aNUPL) metric to correct for any contributions from inactive BTC offerings. And the intelligence platform found out

“aNUPL has traded below zero for the past 119 days, which is comparable to the duration of the bottoming phase of previous bear markets.”

Source: Glassnode

How was the pain distributed?

Looking at the category of BTC investors who have suffered the most “financial stress”, Glassnode looked at BTC’s Short-Term Holder Supply in Profit/Loss and Long-Term Supply in Loss metrics.

Currently, 18% of BTC’s total supply is held by short-term holders. 15% was held at an unrealized loss, while 3% of the supply of BTC held by short-term holders was held for profit.

According to Glassnode, this 3% is “probably approaching a level of seller exhaustion” following the sustained decline in BTC price.

Source: Glassnode

As for long-term holders of BTC, 31% of the coin’s total supply was held by this category of investors at a loss. Historically, the likelihood of capitulation among long-term investors increased when BTC’s long-term supply exceeded 20% of total supply at a loss.

However, at a 31% metric, it was possible that the market had already passed that stage. According to Glassnode this scenario,

“Suggests a similar condition to previous bottoming formations. The market has been in this phase for 1.5 months, with a previous cycle length of 6 to 10 months.”

Source: Glassnode

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