Bitcoin Market is Nearing Bear Territory, Losing 43% Of Supply

Darkfost, a CryptoQuant contributor, argues that a growing portion of Bitcoin’s supply is underwater. The market has moved closer to the historical bear phase than to an established bull trend. According to his latest charts, 43% (or UTXOs) of the Bitcoin supply is in losses. This leaves only 57% as a positive.

Darkfost looking By looking at how the supply of Bitcoin is distributed across its unspent transactions, you can track whether or not there are any coins above cost basis. According to his analysis, the metric reached an area that historically has marked the border between bull markets that are advancing and corrections that are broader.

“Roughly one out of two investors is currently at a loss. More precisely, this refers to the supply held within each UTXO on Bitcoin. At the moment, 43% of that supply is in loss,” He added that “historically, as the histogram shows, we usually see around 75% of what is written on X. “Historically, the histogram indicates, we see about 75% of what is shown. supply in profit“, the description of that level is a “rough boundary between a bull trend and a market correction.”

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This framing of the thesis is crucial. Darkfost noted that bull markets typically begin when the profit share in supply rises above 75%. “confirmed and accelerated.” If more supply begins to fall into loss, it tends to have the opposite effect: corrections intensify, confidence falls and the market starts to look like previous bear-market structure. He said that conditions are looking good with Bitcoin at 57% of its supply now in profit. “closer to those seen during deep bear market phases.”

He did not, however, present the current situation as an all-out collapse. Darkfost noted that there are signs of stabilization on the market, which Darkfost attributed to current consolidation. He also cautioned that the consolidation process might not be over. “It is still possible that the market moves lower in order to shake out LTHs further and push the share of supply in loss toward around 45%, a level that has been reached during previous bear markets,” He has written.

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Macro Backdrop Weighs On Bitcoin

In his second chart, he relates the deterioration in on-chain to a macro environment that is less supportive of risk assets. Tensions in the region have increased. Strait of Hormuz Darkfost said that the oil rally had intensified Bitcoin’s pressure.

“Since the beginning of the year, oil has gained more than 60%, a dramatic increase reflecting market concerns over the geopolitical situation,” He has written. “This is not surprising, given that the Strait of Hormuz accounts for about 20% of global daily oil exports and nearly 35% of oil transported by sea. Any incident that blocks the strait or disrupts transit therefore has an immediate impact on oil prices.”

He expanded that argument to include other markets than energy. The higher oil price, said he, directly feeds into inflation expectations as well as broader market stresses, which historically hasn’t favored speculation. “For a volatile and risky asset like Bitcoin, this type of environment is unfavorable,” Darkfost wrote “Historically, periods when oil prices regain strength often coincide with BTC end-of-cycle phases. These moments also signal geopolitical tensions, which are not conducive to risk-taking or exposure to more speculative assets.”

The two charts together show that the market is not in a clear bear trend, but it’s moving toward an area where that label will be harder to deny. It is a question of whether Bitcoin will be able to reclaim its historical threshold and return the supply share back into profitability, or if macro-stress and continued long-term-holder sales push the market further into losses.

BTC is currently trading for $67.730.

Featured image was created using DALL.E chart by TradingView.com