Analyzing Bitcoin’s Market Structure: Echoes of Early 2022, Glassnode Reports
Leading on-chain analytics firm Glassnode has issued a cautionary report, highlighting striking resemblances between the current Bitcoin market structure and the conditions observed during the first quarter of 2022. This period preceded a significant bear market, prompting investors and analysts to closely scrutinize these emerging patterns.
Supply Quantiles Model Signals Investor Profitability Shift
Glassnode’s analysis begins with its proprietary Supply Quantiles Cost Basis Model, a sophisticated tool that identifies critical price thresholds corresponding to varying degrees of investor profitability.
The model delineates three key supply quantiles:
- 0.75 Quantile: Represents the price level at which 75% of the total Bitcoin supply is held in profit.
- 0.85 Quantile: Indicates the price point where 85% of the supply is profitable.
- 0.95 Quantile: Signifies the price at which a substantial 95% of the supply is in profit.
Recent market movements have seen Bitcoin’s price fall below all three of these crucial levels. This development implies that over 25% of the cryptocurrency’s circulating supply is now held at an unrealized loss.
Glassnode elaborates on the delicate market equilibrium this creates:
“This creates a fragile balance between the risk of top-buyer capitulation and the potential for seller exhaustion to form a bottom.”
Notably, a similar breach below the 0.75 quantile was a characteristic feature of the sideways market conditions experienced in early 2022.
Total Supply in Loss: A Growing Concern
Further reinforcing the parallel to early 2022 is the metric of “Total Supply in Loss,” which quantifies the amount of Bitcoin circulating supply currently held at an unrealized loss.
According to Glassnode’s data, the 7-day moving average for Bitcoin’s Total Supply in Loss recently surged to 7.1 million BTC. This marks the highest level recorded for this metric since September 2023, underscoring a significant increase in underwater positions.
The analytics firm drew a direct comparison:
“The current scale of supply in loss, ranging between 5M–7M BTC, is strikingly similar to the early-2022 sideways market, further reinforcing the resemblance noted above.”
This rising volume of supply in loss suggests increasing pressure on holders who entered the market at higher price points.
Long-Term Holder SOPR Indicates Shrinking Profit Margins
The behavior of long-term holders (LTHs), defined as investors holding Bitcoin for over 155 days, offers another critical insight. Glassnode’s Long-Term Holder Spent Output Profit Ratio (SOPR) metric assesses whether these experienced investors are selling their assets at a profit or a loss.
While the LTH SOPR has recently experienced a sharp decline, its value remains above 1 (currently at 1.43). A value greater than 1 signifies that, on average, long-term holders are still realizing a net profit from their sales. However, the notable shrinkage in this value indicates that their profit margins are diminishing significantly. This trend also aligns with the market
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