More than half of Bitcoin holdings are "underwater", analysts say this phenomenon is more common near the bottom of the bear market.

The intense pullback of Bitcoin has put more than half of its circulating supply into a loss position. Currently trading around $61,000, Bitcoin has retraced about 50% from its all-time high and has fallen below the 200-week moving average for the first time in years, causing more and more holders to accumulate unrealized losses. According to Vetle Lunde of K33 Research, over 50% of Bitcoin trading prices are now below their purchase cost, the first time this has happened since the end of 2022. Just a month ago, this proportion was only 30%. This is the latest pressure signal faced by a market that has been mired in a downward trend for several months. Since last October, Bitcoin and many other tokens have continued to be sold off, with virtually no positive factors to stop the decline. Last week, this global largest cryptocurrency fell to its lowest level since 2024, erasing all gains made since Trump took office and recorded gains under crypto-friendly policies. The latest drop in Bitcoin started with Strategy company (MSTR.US) selling a small amount of tokens held in its treasury, leading to concern among traders considering the company's importance in the crypto ecosystem. K33 also pointed out that outflows from Bitcoin-focused exchange-traded funds (ETFs) are accelerating, with volatility soaring to a three-month high. For Bitcoin holdersboth long-term and short-term investorsthe recent period has been quite agonizing. Ophelia Snyder, co-founder of asset management company 21Shares, said: "Price fluctuations are sourced from structural positions, leverage, emotional reactions, and event-driven risks, but the macro backdrop reflects ongoing market conditions. Until these fundamental conditions change, I believe the market will likely continue to exhibit a similar pattern: range-bound trading, intermittent volatility, deleveraging, and many investors waiting for the next truly important catalyst." The impact goes far beyond paper losses. Each of Bitcoin's strongest rebounds has relied on attracting new buyers willing to pay higher prices than the previous batch of investors. When more than half of the supply is underwater, the market begins to bear the selling pressure of millions of disappointed holders who bought during last year's fervent market. This in itself could create a headwind. Investors experiencing deep unrealized losses typically view rebounds as an opportunity to exit positions rather than add to them, potentially creating a source of selling pressure. At the same time, prolonged price declines could damage one of Bitcoin's most valuable assets: its reputation as a "patient return" traded asset. In each month away from the high points, a new generation of investors may increasingly associate cryptocurrencies with missed opportunities rather than excess returnsespecially in a market narrative background that sees capital flowing into AI chip manufacturers at a faster pace. Michael O'Rourke, Chief Market Strategist at JonesTrading, bluntly stated: "After 17 years of development, Bitcoin, apart from pure speculation, still has no practical use case." On the surface, the development in the crypto space seems constructive, contrasting with the market's anxiety. The Trump administration has a friendly attitude towards cryptocurrencies, actively pushing for various regulatory measures to make related products more mainstream. With the expansion of the investor base, traditional Financial Institutions, Inc. are becoming more accepting. Finally, various projects are starting to materialize on the crypto infrastructurea vision long advocated by digital asset supporters. But the reality is much dimmer. According to compiled market data, a basket of Bitcoin ETFs traded in the US has seen outflows of about $5.5 billion in the past month, further pressuring spot prices. Meanwhile, a report from the Cantor digital asset research team shows that centralized exchange total trading volume last month dropped to $4 trillion, the lowest level in nearly two years for the second consecutive month. However, Lunde of K33 may have found a glimmer of hope amidst the bad news. Historically, when half of Bitcoin trades are in an "underwater" state, it only appears near the bottom of major bear markets, "as the selling pressure from profit-holders becomes increasingly depleted." Lunde wrote in a report that historically, Bitcoin tends to bottom out in the weeks following a breakout of this level, but he does not rule out the possibility of experiencing "one last drop." He stated: "While it is not a guarantee, the current pattern suggests that the downside potential for the next year may be limited compared to the upside potential, strengthening the reasons for a contrarian bullish view."