Bitcoin Supply Overhang: 6.6 Million BTC Bought Above Current Price

Overview

Recent on-chain data reveals that a significant portion of Bitcoin’s supply is currently held at a cost basis above the present spot price. This situation, which involves over 6.6 million BTC, could lead to increased volatility if the price of Bitcoin rebounds in the near future.

What Happened

According to insights shared by a community analyst from CryptoQuant, the metric known as “Supply In Loss” indicates that more than 6.6 million BTC is being held at prices that exceed the current market value. This metric evaluates the total amount of Bitcoin that is experiencing a net unrealized loss by analyzing the transaction history of each token. Specifically, if a Bitcoin’s last transaction price was higher than its current market price, it is classified as being “in a state of loss.”

The Supply In Loss metric aggregates all coins that meet this criterion, providing a comprehensive view of the current market sentiment regarding Bitcoin. A counterpart to this metric, called the Supply In Profit, tracks the supply of Bitcoin that is currently in a profitable state.

The Supply In Loss has surged following a market downturn after Bitcoin reached an all-time high above $126,000. As the market has declined, the Supply In Loss has also risen, indicating that around 6.6 million BTC—approximately one-third of the circulating supply—now sits below its cost basis. This increase in the Supply In Loss represents the highest level of unrealized losses observed in the market since 2023.

The analyst also highlighted another important metric called the UTXO Realized Price Distribution (URPD). This metric details the price levels at which Bitcoin was last purchased, illustrating how the supply that is currently in loss is distributed across various price levels. The data suggests that certain price levels hold a considerable amount of Bitcoin, while others are lacking in supply.

Investors who find themselves holding Bitcoin at a loss often look for opportunities to recoup their investments. A return to their cost basis might prompt some of these investors to sell their holdings, particularly if they fear a further decline in Bitcoin’s price. This potential selling pressure could create significant points of volatility, especially given the large clusters of supply above the current spot price.

From author

The analysis of Bitcoin’s Supply In Loss and UTXO Realized Price Distribution offers valuable insights into the current market dynamics. Understanding the distribution of Bitcoin holdings and the psychological factors driving investor behavior can provide a clearer picture of potential market movements. As the situation evolves, traders and investors should monitor these metrics closely to gauge market sentiment and prepare for possible volatility.

Impact on the crypto market

• A significant portion of Bitcoin’s supply is currently underwater, which could lead to selling pressure as investors seek to recover their losses.
• The presence of large supply clusters above the spot price may create volatility if Bitcoin’s price attempts to rebound.
• The current level of unrealized losses is the highest seen in 2023, indicating a potential shift in market sentiment.
• Investor behavior could be influenced by the desire to recoup losses, leading to strategic selling at key price levels.
• The interplay between the Supply In Loss and the UTXO Realized Price Distribution will be crucial in understanding future price movements and market trends.