"Further weakness may motivate these underwater sellers to finally capitulate," Glassnode warns in its weekly report.
Bitcoin is at a crossroads — with an "increasingly significant" volume of BTC's supply now in an unrealised loss, Glassnode has warned.
A metric known as the Percent of Supply in Profit is now said to be at a "historically significant level" — and Glassnode believes price activity in the coming weeks "will likely provide insight into the medium-term direction of the Bitcoin market." Its blog post added:
"Further weakness may motivate these underwater sellers to finally capitulate, whereas a strong bullish impulse may offer much needed psychological relief, and put more coins back into an unrealized profit."
In other words, there's a danger that investors who made a purchase when Bitcoin was higher may decide to exit their positions — exerting further downward pressure on BTC's price — unless things improve soon.
Overall, Glassnode believes that BTC bears continue to have the upper hand in the market right now — but "modest bullish divergences are appearing across a number of on-chain metrics and indicators."
Where Things Stand
It does seem like many investors are adopting a "wait and see" approach right now, and are resisting the urge to sell or spend their coins — hopeful that the current market drama is temporary.
But what's happening in the global economy more widely may mean that history doesn't repeat itself. Runaway inflation has prompted the Federal Reserve to set the stage for interest rate rises — something that could hurt stocks and cryptocurrencies after almost two years of unabated gains.