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- Bitcoin profitability collapses sharply as long-term holders face increasing stress
- NUPL data signals late-stage pressure without confirming full market capitulation
- Historical cycles suggest more time needed before Bitcoin establishes bottom
Bitcoin market conditions have shifted significantly in the past few months, as on-chain data indicates increasing pressure on long-term holders. Price change rates are continuing to decline, and with real money losing a significant portion of its previous profitability, we can see the market moving away from its previous bullishness toward a more bearish environment. At the same time, we are seeing market participants’ sentiment cool as they adjust to tightening conditions and reduced upside momentum.
According to Moreno, an analyst at CryptoQuant, the current structure resembles a later-stage stress phase and not full capitulation. Such analysis is corroborated by the rapid decline in profitability of long-term holders, especially as it relates to the Net Unrealized Profit and Loss (NUPL). Over the last 140 days, long-term holder profitability has decreased by approximately 58% to about 3%. The swift nature of this decline suggests that most long-term holders of cryptocurrencies are close to breakeven, meaning they have limited margin of error if the price continues to decline.
A comparison with historical lows indicates that previous cycles similar to the current one often preceded larger price corrections than we are experiencing today. Market bottoms have typically occurred only after significant periods of losses by long-term holders. Long-term holders in both 2018 and 2022 experienced similar periods of loss before establishing a firm base for future price rallies, suggesting that time under pressure is a critical factor in confirming a bottom.
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Long-Term Holder Stress Signals Incomplete Capitulation Phase
The adjusted NUPL metric indicates that the crypto market has recently fallen into the so-called “hope/fear zone,” which reflects increased uncertainty as there are fewer profit-taking conditions amid a lack of upward price movement and increased downward price movement. At this point, the adjusted NUPL metric has not yet moved into what might be referred to as “deep” into negative NUPL territory. This is key, as historical data shows that previous market cycles required negative NUPL readings for extended periods before a definitive bottom could be established.
Also, current market conditions suggest there’s a good chance long-term holders haven’t yet completely capitulated. Even though profitability levels are down significantly, many investors are still holding their positions without implementing any loss-donation behavior. This suggests that panic-induced forced selling or “dumb-money” exit strategies have not completely occurred, as evidenced by historical patterns — usually there is some sort of panic or forced selling before market bottoms are set.
Duration of Stress Phase Remains Short Compared to Past Cycles
In addition, the current stress cycle is significantly shorter in duration than those of previous cycles. The past downturns typically lasted longer than the current one (more than 200 days), but the current stress phase appears compressed, suggesting that more time or price action will be required before we see any signs of stabilization.
The market structure continues to exhibit signs of strain, and indicators of a bottom are lacking; therefore, the current analysis indicates that Bitcoin has yet to experience or enter more downside and/or longer-term consolidation before forming a more definitive trend toward recovery.
At this time, Bitcoin is exhibiting late-stage stress with little or no capitulation, so the market may still be adjusting before a definitive bottom is established.
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