Key Takeaways
Bitcoin’s loss supply this cycle is just 9% – A sharp drop from the 25% seen in previous bear markets. Does this mean recent sell-offs are more about taking profits than panicking?
The market’s still split on whether Bitcoin [BTC] has found a floor or not.
In fact, the price action showed that it may be on track for three straight daily higher closes to start September – A setup we haven’t seen since early August. That was when BTC tagged $113k, before running back up to $124k over the next two weeks.
If this setup holds, the STH NUPL might steer clear of the red (capitulation) zone. This would be unlike last week’s BTC dip under $110k that came with $943 million in realized losses, marking a post-April FUD peak.
Source: Glassnode
However, here’s the interesting part.
Despite that sell-off, Bitcoin’s Net Realized Profit/Loss (NRPL) didn’t flip red. Instead, it rocketed to a one-month high, showing $4.2 billion in net realized profits, totally different from the typical bear market flush.
Case in point – Back in 2022, Bitcoin dropped by 63% by year-end, with the NRPL flipping red as investors started selling at a loss. So, does this current divergence signal that market conviction in Bitcoin is holding strong?
Bitcoin’s loss supply signals calm, not capitulation
When sellers’ cost basis is above BTC spot, it’s typically a bullish setup.
On the flip side, if underwater holders start offloading, it can trigger panic-mode, capping any rebound as future conviction fades. From what we’ve seen, Bitcoin’s structure appeared to be leaning bullish at press time.
Consider this – At $110k, just 9% of BTC’s supply seemed to be underwater, with up to 10% unrealized losses. For comparison, the bottom this cycle saw over 25% of the supply underwater, with losses up to 23%.
Source: Glassnode
Simply put, Bitcoin’s underwater holders aren’t panic selling right now.
By contrast, in full-blown bear markets, over 50% of supply has gone underwater with losses up to 78%. As it stands, most BTC is above water, with the NRPL still green at $4.2 billion in net realized profits.
This is a sign that rally conviction has been holding strong. Bitcoin investors are taking profits, rather than selling at a loss. Hence, BTC’s latest 11% dip may just be a healthy reset, not a full-blown capitulation.
