Most of the Bitcoin supply is now loss-making

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Key Takeaways

Bitcoin was the finest performing asset class between 2011 and 2021, however the yr 2022 has introduced nothing however ache
After rising 14X from its pandemic low in March 2020 to its all-time excessive in November 2021 of $68,739, Bitcoin has struggled amid risk-off atmosphere
Pullback has been so extreme that majority of the supply is in loss-making place

What a trip it has been for Bitcoin.

But as we shut the chapter that is 2022, the celebration has became a nightmare for many. Literally, most. Because the majority of the Bitcoin supply, which as I write this is 19.24 million bitcoins, is in a loss-making place.

I’ve written before about this pattern, and as the chart above reveals, we’ve seen larger than 50% of the supply in a loss-making place earlier than. But after a respite, the market has once more careened downward after a sure Mr Bankman-Fried was uncovered.

But it is fairly the sobering statistic when contemplating that in the decade between 2011 and 2021, Bitcoin was the finest performing asset class in the world. Exploding from fractions of a penny to close $69,000 final yr, it made quite a bit of individuals very, very wealthy.

But for anyone who purchased in throughout the pandemic, the story is seemingly very completely different. In extending out the above graph again over the course of the decade, the ups and downs are evident.

Macro atmosphere unprecedented for Bitcoin

The one factor that is evident is that for the first time in Bitcoin’s historical past, it is now experiencing a bear market in the wider financial system.

Launched in 2009, Bitcoin had, till 2022, loved one of the longest and most explosive bull markets in monetary historical past. Risk property throughout the board went sky-high, with the S&P 500 printing a 7X return from its low level amid the Great Financial Crash to its stage at the begin of 2022.

“The scandals and idiosyncratic risk in the cryptocurrency space have been many this year. Nonetheless, despite the torrid happenings in the crypto industry which have undoubtedly made things a lot worse, Bitcoin has plummeted due to the wider macro environment, which has made a mockery of any thought that Bitcoin is not a high-risk asset”, mentioned Max Coupland, director of CoinJournal, when assessing Bitcoin’s 2022 worth motion.

On this notice, when plotting Bitcoin’s worth stage in opposition to the S&P 500, all seems to be wholesome. Only factor is, I reduce the chart off at the begin of 2022.

The under chart then does the identical – plots the S&P 500 in opposition to Bitcoin. Only this time, it focuses on 2022, exhibiting that each the inventory market and Bitcoin have plunged.

“Bitcoin is uncorrelated” narrative killed

Of course, the narrative that Bitcoin is uncorrelated is fully lifeless. Not solely that, however the misguided considering that led some to conclude that Bitcoin is an inflation hedge has been confirmed silly.

There is no different method to put it – Bitcoin has traded like a excessive danger asset.

In reality, it has traded like such a excessive danger asset that not solely was it the finest performing asset of the decade between 2011 and 2021, when markets surged up and all these danger property printed meteoric beneficial properties, however now that we’re experiencing the flipside, it has carried out worse than practically something.

It has pulled again so severely that these beneficial properties which noticed it declare that finest performing asset title are now not sufficient to forestall the reality that almost all of the supply is held by traders in loss making positions.

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Research Methodology

On-chain information sourced by way of Glassnode
S&P 500 and Bitcoin worth information sourced by way of Yahoo Finance
Bitcoin the “best performing asset class of 2011-2021” sourced by way of Yahoo Finance